Consumption smoothing is an implication of the neoclassical model of consumption. This is because a rise in income either today or in the future reduces present value consumption, smoothing consumption.

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Consumption smoothing is an implication of the neoclassical model of consumption because it suggests that individuals prefer to maintain a stable level of consumption over their lifetime. A rise in income, either today or in the future, does not reduce present value consumption but rather allows individuals to adjust their savings and consumption to maintain a stable consumption pattern over time.

Consumption Smoothing Is an Implication of the Neoclassical Model of Consumption