The life-cycle hypothesis suggests that people base their consumption on their:
A) current incomes
B) average lifetime incomes rather than their current incomes
C) temporary incomes
D) future incomes
E) past incomes

Question

Quizplus · Accepted Answer

The life-cycle hypothesis suggests that people base their consumption on their average lifetime incomes rather than their current incomes. This hypothesis argues that individuals make consumption and savings decisions based on their anticipated lifetime income. They save in order to smooth out their consumption over their lifetime, rather than responding solely to fluctuations in their current income.

The Life-Cycle Hypothesis Suggests That People Base Their Consumption on Their