An implication of Figure 16.2 is that consumers:
A) smooth consumption.
B) are risk takers.
C) save all their income in period 1.
D) are risk neutral.
E) always consume .

Question

An implication of Figure 16.2 is that consumers:
A) smooth consumption. 
B) are risk takers. 
C) save all their income in period 1. 
D) are risk neutral. 
E) always consume .

Quizplus · Accepted Answer

Figure 16.2 shows a graph of consumption over time, with smooth consumption being exhibited by the gradual increase in consumption from period 1 to period 2. This suggests that consumers tend to smooth their consumption over time, rather than saving all their income in period 1 or always consuming the same amount. It does not necessarily indicate that consumers are risk takers or risk neutral.

An Implication of Figure 16.2 Is That Consumers