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MPCPerm Precautionary Saving and the Marginal Propensity to Consume Out of Permanent Income August 30 2010 Christopher D. 3. 3 The Deaton Case Permanent Shocks Only with zero market resources the marginal propensity to consume out of p t 1 is one. 5 Conclusion Intuition suggests that rational forward-looking consumers should have a marginal propensity to consume of one out of permanent shocks. But Carroll and Kimball 1996 prove that for problems ...
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