Exam 18: Consumption and Saving

Suppose consumers anticipate that their wealth will grow over time, because of interest earnings and capital gains. According to the life-cycle hypothesis, such optimism should cause current consumption to be ________.

Intertemporal Budget Constraint -Referring to the table above, the present discounted value of initial wealth plus total income is ________.

An intertemporal budget constraint is downward sloping due to ________.

Intertemporal Budget Constraint -Given the table above, suppose consumption in period two is $40,000. Then, the interest rate rises to five percent, and period-two consumption rises to $41,050. We may infer that ________.

A rightward shift in the intertemporal budget line would be caused by ________.

Consumption spending comprises what percentage of total spending?

Consumption smoothing is a logical consequence of ________.

________ will increase current consumption, saving, and future consumption.

Would the Keynesian consumption function work well in a world of libertarian paternalists?

Assuming no bequests, with a real rate of interest of 10 percent, wealth of $60,000, current income of $70,000, future income of $180,000 and future consumption of $158,000, current consumption must equal ________.

During the 2007-2009 financial crisis, many households found themselves with debts to repay. How might this explain the consumer response to the 2008 Tax Rebate?

According to the life-cycle hypothesis, as consumers get older ________.

Consumption smoothing refers to ________.

Intertemporal choice theory is more consistent with ________.

If an indifference curve intersects the budget constraint at two points, then ________.

In the permanent income hypothesis, income that does not persist for a long period of time is known as ________.

According to the life-cycle hypothesis, as people grow older ________.

The value of the marginal propensity to consume is ________.

For many consumption activities -- skiing, for example -- the activity becomes more enjoyable as the consumer becomes more experienced. Assuming that "training consumption" is inexpensive relative to "proficient consumption," do such activities make it more or less likely that a borrowing constraint will be binding?

The Keynesian consumption function and the theory of intertemporal choice are consistent for households ________.