In the Balance Sheet Channel, When Households Have High Levels

question 47

Multiple Choice

In the balance sheet channel, when households have high levels of liquid assets relative to their liabilities, they are more willing to invest in consumer durable goods or housing because

• A)they estimate the likelihood of financial distress to be low.
• B)they are able to borrow at lower interest rates.
• C)they can make these purchases without having to borrow.
• D)they are likely to be middle-aged, when most purchases of consumer durable goods and houses are made.

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