Because people can borrow and save to smooth out life-cycle changes in income, their standard of living in any year depends more on lifetime income than on that year's income.

Question

Quizplus · Accepted Answer

This statement is true because people can adjust their borrowing and saving habits based on changes in their income over their lifetime. This allows them to maintain a relatively stable standard of living overall, rather than being solely dependent on their income in any given year.

Because People Can Borrow and Save to Smooth Out Life-Cycle