Buffer-stock saving
A)is consistent with the life-cycle hypothesis if uncertainty about future needs is included
B)disproves the life-cycle hypothesis
C)is the result of a permanent increase in income that is not immediately consumed
D)explains the wealth effect
E)none of the above

Question

Quizplus · Accepted Answer

Buffer-stock saving is a variation of the life-cycle hypothesis that takes into account uncertainty about future needs. It suggests that individuals may save more than predicted by the traditional life-cycle model in order to create a buffer against income shocks or unexpected expenses.

Buffer-Stock Saving