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If there is an anticipated rise in income, a consumption smoother will exhibit _____ in consumption, and a hand-to-mouth consumer will exhibit _____ in consumption.

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The difference in the level of consumption of a consumption smoother and a hand-to-mouth consumer based on anticipated increase in income.

  • If there is an anticipated rise in income, a consumption smoother will exhibit increase in consumption, and a hand-to-mouth consumer will exhibit no change in consumption.

  • Consumption smoothing can be defined as a process of achieving a balance between expenses on today's needs and saving for tomorrow (future). It is used to regulate spending and saving during different phases of life (increase or decrease in income.

  • Hand-to-mouth consumer is a consumer who spends all his income on consumption. He doesn't save because he earns low income.

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