If uncertainty about future income and future needs is incorporated into the life-cycle theory of consumption, then
A)buffer-stock saving can no longer be explained
B)the fact that consumption is interest sensitive can be explained
C)the fact that people rarely use up their lifetime saving can be explained
D)the fact that saving is interest sensitive can be explained
E)it is significantly different from the permanent-income theory

Question

Quizplus · Accepted Answer

Incorporating uncertainty into the life-cycle theory explains why people might save more as a precaution, leading to them rarely using up their lifetime savings.

If Uncertainty About Future Income and Future Needs Is Incorporated