A Consumer Spending Excessively Today, Intending to Start Saving for Retirement

question 106

Multiple Choice

A consumer spending excessively today, intending to start saving for retirement tomorrow, but deciding to continue spending when tomorrow arrives is an example of:

• A) an income effect offsetting a substitution effect.
• B) time-inconsistent preferences.
• C) spending out of permanent income, but not out of transitory income.
• D) an intertemporal budget constraint.

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Definitions:

Goal Hierarchies

The organization of desired outcomes in a prioritized structure, reflecting the importance or urgency of achieving each goal.

Self-Regulation

Self-regulation is the ability to manage and control one's own emotions, thoughts, and behaviors in accordance with personal goals and societal norms.

Temporal Discounting

The tendency to value immediate rewards more highly than future rewards, influencing decision-making and impulse control.

Short-Range Decisions

Choices or judgments made with immediate or near-term outcomes in mind, often without regard to long-term implications.