Which statement about the Life Cycle Hypothesis is NOT true?
A) It describes the choices of consumers who live for a long time.
B) It separates consumers' earnings into two stages.
C) It assumes that people prefer instability.
D) It assumes that people prefer a higher standard of living to a lower standard of living.

Question

Quizplus · Accepted Answer

The Life Cycle Hypothesis does not assume that people prefer instability. In fact, it assumes that people prefer certainty and stability in their consumption and savings decisions. The other statements are true - it describes the choices of consumers who live for a long time, separates earnings into two stages (working years and retirement), and assumes that people prefer a higher standard of living to a lower standard of living.

Which Statement About the Life Cycle Hypothesis Is NOT True