The behavior of consumers spreading increases in income earned in one period into increases in consumption over several periods is known as:
A) random-walk consumption.
B) transitory consumption.
C) consumption smoothing.
D) the income effect.

Question

Quizplus · Accepted Answer

This behavior of consumers is known as consumption smoothing, where they spread out increases in income over several periods to maintain a steady level of consumption.

The Behavior of Consumers Spreading Increases in Income Earned in One