According to the simplified life-cycle theory of consumption, a retired person with zero income from labor would
A)only consume the interest on accumulated wealth
B)consume a fraction of accumulated wealth based upon her/his life expectancy
C)have to decrease consumption sharply in order not to run out of funds too soon
D)expect to be financially supported by her/his children
E)consume more than during her/his working years since she/he does not expect to live much longer

Question

Quizplus · Accepted Answer

According to the simplified life-cycle theory of consumption, a retired person with zero income from labor would consume a fraction of accumulated wealth based upon her/his life expectancy. This means they would budget their savings to last throughout their expected lifetime.

According to the Simplified Life-Cycle Theory of Consumption, a Retired