If I spend more each year because I know that I will receive Social Security payments when I retire,I am exhibiting which of the following effects?
A)Retirement
B)Bequest
C)Wealth substitution
D)Opportunity cost
E)None of the above

Question

Quizplus · Accepted Answer

Wealth substitution effect refers to the tendency of an individual to spend more money in their current life because they believe they will receive Social Security payments in the future. The idea behind this effect is that people are more likely to spend their money now, knowing that they will have a source of income in the future. Therefore, if an individual spends more each year in anticipation of receiving Social Security payments when they retire, they are exhibiting wealth substitution effect.

If I Spend More Each Year Because I Know That