Macroeconomic theory and evidence
The life-cycle hypothesis was postulated by Ando and Modigliani in an attempt to explain the behaviour of consumption function in the long and short run. According to this theory, current…
Duesenberry took a different approach to develop a model explaining consumption behaviour. While other models such as the permanent income hypothesis are based on utility function independent of consumption by…
Empirical studies and observations exposed the shortcomings of the absolute income hypothesis. It failed to explain the patterns of consumption over a long period of time. Moreover, it did not…
Consumption expenditure plays an important role in determining the gross national product (GNP). Consumption generally contributes the biggest portion of GNP, becoming a decisive factor responsible for the national income…
