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.
-In the absence of borrowing constraints,then beginning at age 18,the individual should consume
A) all of his income as he receives it each year
B) $10,000 every year
C) $20,000 every year
D) $30,000 every year
E) $25,000 every year

Question

Quizplus · Accepted Answer

The Answer of 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.
-In the absence of borrowing constraints,then beginning at age 18,the individual should consume
A) all of his income as he receives it each year
B) $10,000 every year
C) $20,000 every year
D) $30,000 every year
E) $25,000 every year

The Next Questions Refer to the Following