Motivation wadb According to the life-cycle permanent income Hi consumers decide how much to consume, keeping in mind their future prospects They form intertemporal plans aimed at smoothing the (discounted )marginal utility of consumption over the life cycle Any period to period change in the actual level of the marginal utility of consumption is uncorrelated with past information available to the household. That is ,it should be a result of unpredictable shocksMotivation • According to the life-cycle permanent income Hp consumers decide how much to consume, keeping in mind their future prospects • They form intertemporal plans aimed at smoothing the (discounted) marginal utility of consumption over the life cycle • Any period to period change in the actual level of the marginal utility of consumption is uncorrelated with past information available to the household. That is, it should be a result of unpredictable shocks