Preferences for Steady Consumption Paths Over Variable Consumption Paths Mean

question 6

Multiple Choice

Preferences for steady consumption paths over variable consumption paths mean that

• A) any permanent change in an individual's disposable income must generate either a change in the desired bequest or a comparable change in consumption.
• B) the applicable marginal propensity to consume out of a permanent change in an individual's disposable income must be close to 1.
• C) any temporary change in an individual's disposable income must generate only a small change in yearly consumption if it is to be spread out smoothly over a foreseeable lifetime.
• D) all of the above.
• E) a and c only.

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