How to ensure smooth consumption.

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Answer 1

Question

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.

Economics Concept Introduction

Concept introduction:

Consumption: Consumption is defined as the act of utilising the total or partly income to meet the needs in a given period of time.

Savings: Savings is defined as the part of income that is not consumed in the current period.

Consumption smoothing: Consumption smoothing is the economic concept which refers to the desire of people to have a stable consumption pattern.

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Use the figure below to answer the following question. Point X and Y represent two non-ideal contracts that the individual is faced with buying. From this information, you can conclude that if given the option between points B and Y the individual would prefer: Utility A у в 0000 UKI) E[Bp IH point B- the actuarially fair and full contract point Y-the actuarially unfair but full contract point Y- the actuarially fair, but partial contract point B- the actuarially fair, but partial contract income

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Answer 2

Question

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.

Economics Concept Introduction

Concept introduction:

Consumption: Consumption is defined as the act of utilising the total or partly income to meet the needs in a given period of time.

Savings: Savings is defined as the part of income that is not consumed in the current period.

Consumption smoothing: Consumption smoothing is the economic concept which refers to the desire of people to have a stable consumption pattern.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.

Economics Concept Introduction

Concept introduction:

Consumption: Consumption is defined as the act of utilising the total or partly income to meet the needs in a given period of time.

Savings: Savings is defined as the part of income that is not consumed in the current period.

Consumption smoothing: Consumption smoothing is the economic concept which refers to the desire of people to have a stable consumption pattern.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.

Economics Concept Introduction

Concept introduction:

Consumption: Consumption is defined as the act of utilising the total or partly income to meet the needs in a given period of time.

Savings: Savings is defined as the part of income that is not consumed in the current period.

Consumption smoothing: Consumption smoothing is the economic concept which refers to the desire of people to have a stable consumption pattern.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.

Economics Concept Introduction

Concept introduction:

Consumption: Consumption is defined as the act of utilising the total or partly income to meet the needs in a given period of time.

Savings: Savings is defined as the part of income that is not consumed in the current period.

Consumption smoothing: Consumption smoothing is the economic concept which refers to the desire of people to have a stable consumption pattern.

Answer 6

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.

Economics Concept Introduction

Concept introduction:

Consumption: Consumption is defined as the act of utilising the total or partly income to meet the needs in a given period of time.

Savings: Savings is defined as the part of income that is not consumed in the current period.

Consumption smoothing: Consumption smoothing is the economic concept which refers to the desire of people to have a stable consumption pattern.

Answer 7

Chapter 9, Problem 1FT

To determine

How to ensure smooth consumption.

Answer 8

Expert Solution & Answer

Explanation of Solution

If people want to smooth their consumption over time, they tend to reduce the current consumption and save more. According to the consumption – smoothing theory, people who have fluctuations in income, save most of their income in the good years and use it during the bad times in order to maintain a smooth consumption pattern. When people receive an unexpected winning as a lottery, they tend to postpone their consumption from periods of high income to low income to obtain more stability and predictability. They may also spend money for consuming durable goods like houses or cars which represent spending over time.