If Marios is a consumption smoother and has just won a prize of $12,000, we can expect Marios to exhibit:
A)a large change in consumption.
B)a small change in consumption.
C)zero change in saving.
D)no change in MPC.

Question

Quizplus · Accepted Answer

Consumption smoothing is the practice of trying to maintain a stable level of consumption over time, rather than experiencing large changes due to fluctuations in income. Therefore, if Marios is a consumption smoother who has won a prize of $12,000, we would expect him to save a portion of the prize and increase his consumption only slightly, resulting in a small change in consumption.

If Marios Is a Consumption Smoother and Has Just Won