Suppose a Person's Preferences Are to "Consumption Smooth," Which Means

question 16

Multiple Choice

Suppose a person's preferences are to "consumption smooth," which means they wish to get for all incomes and interest rates.For any interest rate and ,the person will ____ in the first period.

• A) borrow
• B) save
• C) neither borrow nor save
• D) both borrow and save

---

Definitions:

Product Cost

The total expense incurred in creating a product, including raw materials, labor, and overhead costs.

Period Cost

Expenses that are incurred to support business operations during a particular period, but are not directly tied to the production of goods or services.

Direct Cost

Expenses that can be directly traced to the production of specific goods or services, like raw materials or labor.

Indirect Cost

Expenses not directly tied to a specific product or service but necessary for the operation of a business, such as utilities and rent.