Question

consumption and saving — end of chapter problem which of the following people are consumption smoothing, and which are not? sharon tirabassi won $10 million in the ontario lottery in 2004. by 2015, she had burned through almost all the winnings, was riding the bus to part - time jobs, and was living in a rental property. sharon was: o consumption smoothing o not consumption smoothing karyn takes out modest student and personal loans to pay for living expenses while she finishes her degree. she plans to get an accounting degree and enter the workforce, making about $50,000 a year, and will eventually earn close to six figures. karyn is: o consumption smoothing o not consumption smoothing

Explanation:

Consumption - smoothing is the idea that people try to have a relatively stable level of consumption over time. Karyn is taking loans to pay for living expenses while studying and will earn a high - income later, which is a form of consumption - smoothing. Sharon, who burned through her lottery winnings quickly, is not engaging in consumption - smoothing as she did not spread out her spending over time.

Answer:

Karyn is: Consumption smoothing
Sharon was: Not consumption smoothing