Consider Consumption in Two Periods, C₁ and C₂ Consumption Smoothing

Multiple Choice

Consider consumption in two periods, c₁ and c₂ Consumption smoothing implies that:

A) if taxes fall today, they will rise tomorrow.
B) people would consume c₁ = c₂
C) people would rather consume the average of c₁ and c₂ .
D) transitory income is zero.
E) people always know their future incomes and adjust consumption accordingly.