Consider consumption in two periods, $c _ { 1 }$ and $c _ { 2 }$ . Consumption smoothing implies:
A) if taxes fall today, they will rise tomorrow
B) people would consume $c _ { 1 } = c _ { 2 }$
C) people would rather consume the average of $c _ { 1 }$ and $c _ { 2 }$
D) transitory income is zero
E) people always know their future incomes and adjust consumption accordingly

Question

Consider consumption in two periods, $c _ { 1 }$ and $c _ { 2 }$  . Consumption smoothing implies:
A) if taxes fall today, they will rise tomorrow
B) people would consume $c _ { 1 } = c _ { 2 }$
C) people would rather consume the average of $c _ { 1 }$ and $c _ { 2 }$
D) transitory income is zero
E) people always know their future incomes and adjust consumption accordingly

Quizplus · Accepted Answer

Consumption smoothing implies that people would rather consume the average of $c _ { 1 }$ and $c _ { 2 }$.

Consider Consumption in Two Periods c1c _ { 1 }c1​ And c2c _ { 2 }c2​

Consider Consumption in Two Periods $c _ { 1 }$ And $c _ { 2 }$