A household that expects a decrease in disposable income in the future will
A)increase its current consumption spending
B)decrease its current consumption spending
C)maintain its current consumption spending
D)increase its current consumption spending,then increase spending when income falls
E)decrease its current consumption spending,then increase spending when income falls

Question

Quizplus · Accepted Answer

A household that expects a decrease in disposable income in the future will likely decrease its current consumption spending to prepare for the expected decrease in income. This is known as precautionary saving.

A Household That Expects a Decrease in Disposable Income in the Future