If two households have the same disposable income in the current year, the household with the
A) higher expected future income will consume a larger portion of its current income today.
B) lower expected future income will spend a larger portion of its current income on consumption today because it will increase its saving in the future.
C) lower expected future income will consume more today while it has the money.
D) none of the above

Question

Quizplus · Accepted Answer

The household with higher expected future income will be more willing to spend a larger portion of its current income today as it has confidence in its ability to earn a higher income in the future. On the other hand, the household with lower expected future income may save a larger portion of its current income today to support their future consumption needs.

If Two Households Have the Same Disposable Income in the Current