Which of the following is the best definition of ""consumption smoothing? a. Borrowing in periods of high income and saving in periods of low income to make income less variable than consumption. b. Borrowing in periods of high income and saving in periods of low income to make consumption less variable than income. c. Borrowing in periods of low income and saving in periods of high income to make consumption less variable than income. d. Borrowing in periods of low income and saving in periods of high income to make income less variable than consumption. "

C. Borrowing in periods of low income and saving in periods of high income to make consumption less variable than income.

Explanation:

Consumption smoothing is an economic concept can be defined as the balance which we create between our spending and saving during various phases and stages of our lives in order to attain overall higher and balanced standard of living. It needs planning and then sticking to a set budget so that we can pay our bills when they are due specifically in the period of low income. We have to Borrow in periods of low income and do saving in periods of high income to make consumption less variable than income in order to attain stable way of consumption. Human beings translate their money from high income period to the low income period to gain predictability and stability and moreover to make consumption less variable than income in that period.

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