According to the life-cycle model,
A)saving increases over the typical individual's lifetime
B)consumption decreases over the life cycle as individual save more for retirement
C)people with high incomes save a smaller fraction of their incomes than do people with low income
D)saving and consumption tend to vary in a systematic way over an individual's lifetime
E)the saving rate for an economy as a whole increases over its lifetime

Question

Quizplus · Accepted Answer

The life-cycle model suggests that saving and consumption tend to vary in a systematic way over an individual's lifetime. As people age, their income typically peaks and then declines, leading to a pattern of higher saving and lower consumption earlier in life, followed by lower saving and higher consumption later in life. This pattern is based on the assumption that people want to smooth their consumption over their lifetimes, and that they can achieve this by borrowing and saving as needed.

According to the Life-Cycle Model