Consumption smoothing refers to
A) the tendency of all consumers to choose the same amount of current consumption.
B) the tendency of consumers to seek a consumption path over time that is smoother than income.
C) the tendency of consumers to seek an income path over time that is smoother than consumption.
D) consumer's concerns about going heavily into debt.
E) balance savings with consumption over time.

Question

Quizplus · Accepted Answer

Consumption smoothing refers to the behavior of consumers who try to minimize large fluctuations in their consumption over time by saving during periods of higher income and drawing on those savings during periods of lower income. Therefore, option B is the correct definition of consumption smoothing. Options A, C, D, and E do not accurately define consumption smoothing.

Consumption Smoothing Refers to