What economic effect has people allocating consumption across time to bring the greatest return?
A) sticky wage benefits
B) irreversible investment
C) intertemporal substitution
D) labor adjustment cost

Question

Quizplus · Accepted Answer

Intertemporal substitution refers to the behavior of individuals who allocate consumption across time to optimize their lifetime utility. This means that people aim to maximize the total satisfaction they derive from consuming goods and services over their lifetime, which requires making trade-offs between present and future consumption. This behavior can have significant economic effects, including influencing investment decisions and affecting the overall level of economic activity. For example, if people expect their future income to be higher, they may choose to save more today and invest in projects that yield higher returns in the future. This can lead to increased investment, economic growth and development.

What Economic Effect Has People Allocating Consumption Across Time to Bring