Professor Fester not only teaches about
the permanent-income hypothesis, but lives it as well.
Next year he will take a sabbatical and will receive only
one half his normal salary. As a result, Fester's
fall by one half.
fall only a little but his saving will decline a great
fall by more by one half.
probably increase because he now has
more time to spend money.
Compared to the original Keynesian
theory, consumption behavior implied in the
permanent-income hypothesis makes:
fiscal policy quicker and more
fiscal policy slower and less
monetary policy quicker and more
monetary policy slower and less