The Notion of Consumption Smoothing Means

question 107

Multiple Choice

The notion of consumption smoothing means

• A) people tend to spend about the same amount each month.
• B) people tend to spend about the same amount each year,and if more is spent this year than in the past,they would tend to spend less next year.
• C) consumption varies less than income over a person's lifetime.In early life people tend to borrow,in late life people tend to dissave,but in their middle years they tend to save.
• D) consumption patterns tend to correlate perfectly with income.People spend the exact amount of their incomes over their lifetimes.
• E) consumption tends to vary more than income over a person's lifetime.Although people should smooth their consumption over the years,they don't.If consumption were smoothed,people would be better off.

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Definitions:

Capital

Economic resources that are used to produce goods and services, including buildings, machinery, tools, and equipment.

Labor

The human effort, including both physical and mental, used in the production of goods and services.

Coffee Machines

Devices designed for brewing coffee, which can vary widely in their functionality, size, and brewing capacity.

Employees

Individuals who work for a business or organization and receive compensation for their labor, often guided by a contract of employment.