According to the Life-Cycle Hypothesis,if a Person Wants Consumption to Be

question 11

Multiple Choice

According to the life-cycle hypothesis,if a person wants consumption to be constant over her lifetime,she will smooth consumption by initially ________ over her lifetime.

• A) saving, then dissaving, then borrowing
• B) borrowing, then saving, then dissaving
• C) dissaving, then borrowing, then saving
• D) saving, then borrowing, then dissaving

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Definitions:

Contribution Margin Ratio

The percentage of each sales dollar remaining after variable costs have been deducted, indicating how much contributes to fixed costs and net profit.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, indicating the amount each unit contributes to covering fixed costs and generating profit.

Degree of Operating Leverage

A financial ratio that measures the percentage change in operating income in response to a percentage change in sales.

Forecasted Contribution Margin

An estimated metric that indicates the difference between sales revenue and variable costs of goods sold, used to predict the profitability of sales.