Empirical studies of Franco Modigliani's life-cycle hypothesis show that:
A) most elderly individuals try to exhaust all their savings by the time they die.
B) the elderly do not seem to run down their wealth in old age, as a simple version of the theory would predict.
C) elderly individuals generally do not want to leave bequests for their children.
D) precautionary saving is not an important saving motive for the elderly.

Question

Quizplus · Accepted Answer

Empirical studies have shown that the elderly do not use up all their savings in old age, which is contrary to what the simple version of the life-cycle theory predicts. This suggests that other factors, such as bequest motives or precautionary savings, may be at play.

Empirical Studies of Franco Modigliani's Life-Cycle Hypothesis Show That