Consumption smoothing implies that if the discount factor is close to 1 , then optimal consumption across time will be nearly constant.

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Consumption smoothing suggests that individuals prefer to have a stable consumption pattern over time. A discount factor close to 1 indicates a low rate of time preference, meaning individuals value future consumption almost as much as present consumption, leading to nearly constant consumption across time periods.

Consumption Smoothing Implies That If the Discount Factor Is Close