Question
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The source of the for loanable funds is saving. market demand interest rate supply The source of the for loanable funds is investment. demand market supply interest rate The represents the price of a loan Which of the following is the best definition of "consumption smoothing?" Borrowing in periods of high income and saving in periods of low income to make income less variable than consumption. Borrowing in periods of high income and saving in periods of low income to make consumption less variable than income. Borrowing in periods of low income and saving in periods of high income to make consumption less variable than income. Borrowing in periods of low income and saving in periods of high income to make income less variable than consumption. Which of the following is an example of consumption smoothing? Acquiring a mortgage to purchase a house. Taking student loans. Depositing a portion of one's salary into a retirement account. All of these are examples of consumption smoothing.
Explanation / Answer
(1) Source of supply of loanable funds is saving.
(2) Source of demand for loanable funds is investment.
(3) Interest rate represents price of a loan.
(4) Consumption smoothing:
Borrowing in periods of low income and saving in period of high income to make consumption less variable than income
(5) Example of Consumption smoothing:
All of these [Because all options mention saving during high-income period and borrowing during low-income periods]
