permanent income hypothesis

[Var1995]

is b the right answer?

[Dr. Strange]

The answer is c.
This hypothesis is combination of permanent income hypothesis and rational expectation model.
Robert Hall showed that if permanent income hypothesis and rational expectation are both correct then changes in consumption over time follows a random walk.
Read pg 478-79 of Macroeconomics of Mankiw( Robert Hall and Random Walk Hypothesis).

[Var1995]

thanks