According to the Life-Cycle Hypothesis

question 63

Multiple Choice

According to the life-cycle hypothesis,

• A) the present value of lifetime consumption equals the future value of lifetime income.
• B) the income earned in a lifetime will be evenly divided between consumption and saving.
• C) household consumption depends on income that households expect to receive each year, and financial markets are used to smooth consumption in response to changes in transitory income.
• D) households use financial markets to transfer funds from periods when income is high to periods when income is low.

---

Definitions:

Activity-Based Costing

An accounting method that assigns costs to products or services based on the activities performed in their production, offering more precise product costing.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on the activities that generate the costs.

Direct Labor-Hours

It measures the total hours worked by employees directly involved in manufacturing a product.

Activity-Based Costing

A method of costing that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.