Suppose a person's preferences are to "consumption smooth," which means they wish to get for all incomes and interest rates.For any interest rate and ,the person will ____ in the first period.

Question

Suppose a person's preferences are to "consumption smooth," which means they wish to get  for all incomes and interest rates.For any interest rate and  ,the person will ____ in the first period.

Quizplus · Accepted Answer

If a person wants to consumption smooth, they want to maintain a constant level of consumption over time, regardless of their income or interest rates. Therefore, they will neither borrow nor save in the first period, as they want to maintain their current consumption level.

Suppose a Person's Preferences Are to "Consumption Smooth," Which Means