Problem
According to the PIH, the ratio of permanent consumption to permanent income is uncorrelated with the level of income. Thus someone earning $5,000,000 per year would save the same percentage of their income as someone earning $50,000 per year. Yet we find that for any given year, the saving rate has a strong positive correlation with the level of income. How can these facts be reconciled?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.