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This model uses static comparative statics -- no genuine time axis exists.
Current income jumps while past income stays the same. Only part of the windfall feeds into permanent income, so consumption rises modestly.
Both current and past income rise together, signaling a permanent shift. Consumption responds nearly one-for-one.
Households weight current income more heavily when forming permanent-income estimates, making consumption more volatile.
Diagram, readouts, and summary update with each change.
Consumption
Expectations
Income
Impact summary
Current consumption
Consumption
88.2
Permanent income
98.0
Transitory income
2.0
Browser-local save -- persists across reloads, not synced to your account.