Which of the following expressions illustrates the point that lifetime consumption (over a two-period framework) should equal lifetime earnings? Assume that the rate of interest is zero. C denotes consumption, W denotes wages, H denotes hours, and the subscript denotes the periods.

Question

Quizplus · Accepted Answer

The correct expression is D) C1 + C2 = W1H1 + W2H2. This equation shows that the total consumption over two periods (C1 + C2) should equal the total earnings over those two periods (W1H1 + W2H2), assuming the rate of interest is zero. This reflects the principle that lifetime consumption should match lifetime earnings.

Which of the Following Expressions Illustrates the Point That Lifetime