A Default Rule

question 19

Multiple Choice

A default rule:

• A) is a consequence that users of commitment devices agree to if they fail to follow through with their commitment.
• B) defines what will automatically occur if someone fails to make an active decision otherwise.
• C) is a defined limit used to mark when someone is decidedly not making a good decision.
• D) is the defined strength of a given commitment needed to get an individual to follow through with the commitment.

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Definitions:

Disposable Income

Money freed up for households to allocate towards savings and spending after income tax removal.

Induced Consumption

The portion of consumer spending that rises when disposable income rises and falls when disposable income decreases.

Autonomous Consumption

The minimum level of spending that must occur, even if a household has no income.

Disposable Income

The sum households have for expenditures and savings after taxes on income are deducted.