Which of the following is TRUE about the lifecycle theory of savings?
A) People tend to save during the early years of their lifetimes,dissave during their prime working years,and borrow during their retirement years.
B) People tend to borrow during the early years of their lifetimes,invest during their prime working years,and save during their retirement years.
C) People tend to borrow during the early years of their lifetimes,save during their prime working years,and dissave during their retirement years.
D) People tend to save during the early years of their lifetimes,borrow during their prime working years,and invest during their retirement years.

Question

Quizplus · Accepted Answer

The lifecycle theory of savings states that people tend to borrow during the early years of their lifetimes to finance education, homes, and other investments. During their prime working years, they tend to save as they have a higher income and can afford to save. Finally, during their retirement years, they dissave by drawing down their savings to fund their retirement expenses. Therefore, option C (People tend to borrow during the early years of their lifetimes, save during their prime working years, and dissave during their retirement years) is the correct option.

Which of the Following Is TRUE About the Lifecycle Theory