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 tendency of consumers to seek a consumption path over time that is smoother than income. This means that consumers try to balance their savings and consumption over a period of time to avoid sudden changes in their standard of living due to fluctuations in their income. By doing so, they can maintain a relatively stable level of consumption and avoid financial distress.

Consumption Smoothing Refers to