Economists believe that average lifetime income is a better predictor of a person's current living standard than current income because:

Question

Quizplus · Accepted Answer

People can save and borrow to smooth out their consumption over their lifetime, making average lifetime income a better indicator of living standards than current income. This reflects the economic principle of consumption smoothing, where individuals plan their spending and saving to maintain a stable standard of living throughout their life.

Economists Believe That Average Lifetime Income Is a Better Predictor