In a one-period economy
A) consumption equals disposable income.
B) consumption equals disposable income plus the value of non-market work.
C) savings is always positive.
D) consumers may increase their consumption by borrowing.
E) consumers save more than they consume.

Question

Quizplus · Accepted Answer

In a one-period economy, there is no opportunity for consumers to save their income for future consumption. Therefore, their consumption equals their disposable income, as there is no other income or savings to consider. Choice B is incorrect because non-market work does not generate income that can be included in disposable income. Choice C is incorrect because savings can be negative if consumers borrow to finance their consumption. Choice D is incorrect because while consumers can increase consumption by borrowing, it is not a guarantee or requirement. Choice E is incorrect because in a one-period economy, there is no time for consumers to save more than they consume.

In a One-Period Economy