Total consumption in the economy is composed of:
A)only permanent changes in consumption.
B)consumption by consumption smoothers only.
C)consumption by hand-to-mouth consumers only.
D)consumption by hand-to-mouth consumers and consumption by consumption smoothers.

Question

Quizplus · Accepted Answer

Total consumption in the economy includes consumption by both hand-to-mouth consumers, who spend their entire income as soon as they receive it, and consumption smoothers, who save or borrow to smooth out their consumption over time. Therefore, option D is the correct answer. Options A, B, and C are incorrect as they do not reflect the complete picture of total consumption in the economy.

Total Consumption in the Economy Is Composed Of