For the majority of the U.S.population ________.
A)consumption is driven solely by current income
B)consumption smoothing is possible
C)a change in lifetime resources will not change current consumption
D)a change in lifetime resources will not change future consumption

Question

Quizplus · Accepted Answer

The concept of consumption smoothing suggests that individuals will adjust their level of consumption across their lifespan by saving or borrowing in order to maintain a steady level of consumption. This suggests that current consumption is not solely driven by current income (option A), and that a change in lifetime resources (such as a higher income in the future) can lead to changes in current consumption (option C is incorrect). However, as individuals adjust their current consumption to maintain a steady level of consumption over time, a change in lifetime resources will not necessarily change future consumption in a one-to-one manner (option D is incorrect).

For the Majority of the U.S.population ________