Figure 16.3: Daily Returns to Jim-Bob's Spark Plugs, LLC
-According to the neoclassical model, individuals ________ over their lifetimes; however, one study showed that ________ at retirement. This puzzle was solved when two economists tested the neoclassical model using ________.
A) hold consumption constant; consumption rises sharply; purchases of RVs
B) slow their consumption; consumption rises; data from Brazil
C) consumption smooth; consumption falls 17 percent; food consumption
D) do not maximize lifetime utilities; they have zero income; dividend receipts
E) rely on transitory income; the discount factor is one; cost minimization

Question

Figure 16.3: Daily Returns to Jim-Bob's Spark Plugs, LLC 
-According to the neoclassical model, individuals ________ over their lifetimes; however, one study showed that ________ at retirement. This puzzle was solved when two economists tested the neoclassical model using ________.
A) hold consumption constant; consumption rises sharply; purchases of RVs 
B) slow their consumption; consumption rises; data from Brazil 
C) consumption smooth; consumption falls 17 percent; food consumption 
D) do not maximize lifetime utilities; they have zero income; dividend receipts 
E) rely on transitory income; the discount factor is one; cost minimization

Quizplus · Accepted Answer

According to the neoclassical model, individuals consume smooth over their lifetimes; however, one study showed that consumption falls 17 percent at retirement. This puzzle was solved when two economists tested the neoclassical model using food consumption data.

Figure 163: Daily Returns to Jim-Bob's Spark Plugs, LLC