The consumption-smoothing theory implies that a country whose people have a very low life expectancy has:
A) low consumption.
B) high investment.
C) a low savings rate.
D) a high borrowing rate.

Question

Quizplus · Accepted Answer

The consumption-smoothing theory suggests that individuals aim to maintain a stable consumption level throughout their lifetime. In a country with low life expectancy, people are less likely to save for the future (since the future is uncertain and shorter), leading to a low savings rate.

The Consumption-Smoothing Theory Implies That a Country Whose People Have