The life-cycle model assumes that consumers use saving and borrowing to ______ consumption over their life cycle.
A) increase
B) decrease
C) smooth
D) vary

Question

Quizplus · Accepted Answer

The life-cycle model assumes that consumers use saving and borrowing to smooth consumption over their life cycle. This means that they save during their working years to provide for retirement and unexpected expenses, and borrow if necessary to maintain a consistent level of consumption throughout their lifetime. By doing so, they are able to avoid drastic fluctuations in their consumption patterns and maintain a stable standard of living over time.

The Life-Cycle Model Assumes That Consumers Use Saving and Borrowing