Absolute Income Hypothesis

All you want to know about Absolute Income Hypothesis

The Absolute Income Hypothesis in economics was proposed by English economist John Maynard Keynes (1883–1946), and has been refined extensively during the 1960s and 1970s, notably by American economist James Tobin (1918–2002).

The theory examines the relationship between income and consumption, and asserts that the consumption level of a household depends not on its relative income but on its absolute level of income. As income rises, the theory asserts, consumption will also rise but not necessarily at the same rate.

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