The Next Questions Refer to the Following

question 46

Multiple Choice

The next questions refer to the following.
Consider an individual who enters adulthood and the labor force at age 18, expects to work 5 years at a real income of $10,000 per year, anticipates earning a real income of $40,000 per year from age 23 to 63, expects to retire with a $10,000 annual pension, and live until age 78. Suppose the interest rate is zero, and the individual seeks perfectly smooth consumption across his adult lifetime.
-Suppose there are no borrowing constraints but the individual wishes to leave a bequest of $120,000 (after adjusting for inflation) to heirs. Then annual consumption should be

• A) $12,000
• B) $16,000
• C) $20,000
• D) $24,000
• E) $28,000

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Definitions:

Strange Situation

A procedure developed by psychologist Mary Ainsworth to observe attachment relationships between a caregiver and child.

Ainsworth

Mary Ainsworth, known for her work in developmental psychology, especially attachment theory.

Attachment

An emotional bond that forms between individuals, particularly between a child and caregiver, which is crucial for child development and influences relationships in adulthood.

Decades

Periods of ten years, often used to refer to specific historical or cultural epochs.