If an individual has no access to credit markets:
A)her marginal propensity to consume is one.
B)she saves much less.
C)she can consumption smooth.
D)her marginal propensity to consume is equal to 1/T if she lives T periods.
E)her future consumption is equal to zero.

Question

Quizplus · Accepted Answer

Without access to credit markets, an individual cannot borrow to finance consumption, leading to a marginal propensity to consume of one, as they will spend all their current income.

If an Individual Has No Access to Credit Markets