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Permanent Income

Many economic problems involve the allocation of resources across time; for example, how much money to consume now and how much to save for future consumption, or how much money to invest in facilities to be used in the future. Optimal decisions about how much to spend or invest at a moment in time depend not only on the resources available at that moment but also on the resources that will be available in the future. For example, a school district with a given level of current property tax revenues is more likely to make capital investments that will be paid off over time if it expects rising revenues in the future rather than falling revenues.

Permanent income is a measure of the amount of income ...

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