Working with the life-cycle hypothesis,we find in a cross-section study of consumption that as income rises there is a growing proportion of ________ people and thus a ________ saving ratio.
A)retired,rising
B)retired,falling
C)working,rising
D)working,falling

Question

Quizplus · Accepted Answer

According to the life-cycle hypothesis, as income rises and people move from their working years to their retirement years, they save more in order to finance their future consumption needs. Therefore, in a cross-section study of consumption, we would expect to see a growing proportion of working people (who are still in the saving phase of their life-cycle) and, as a result, a rising saving ratio.

Working with the Life-Cycle Hypothesis,we Find in a Cross-Section Study