Suppose that an individual receives an unexpected, one-time windfall of
$1,000. To determine its effect on future consumption,
A) preferences about the desirability of both steady consumption and the desired size of the bequest are required.
B) it would be necessary to know the desired size of the bequest, but the desirability of steady consumption is immaterial.
C) it would be necessary to know the value ascribed to steady consumption, but the desired size of the bequest is immaterial.
D) neither the desirability of steady consumption nor the desired size of the bequest is material because $1,000 is too small a sum to be affected by either.
E) none of the above.

Question

Quizplus · Accepted Answer

Preferences about both steady consumption and the desired size of the bequest are important for understanding how an individual might allocate an unexpected windfall. These preferences influence whether the individual will spend the windfall immediately, save it, or allocate it towards their desired bequest, affecting their future consumption patterns.

Suppose That an Individual Receives an Unexpected, One-Time Windfall of