The Theory of Consumption of Durable Goods

question 37

Multiple Choice

The theory of consumption of durable goods

• A)is basically a theory of investment applied to households
• B)states that durable goods purchases are very insensitive to interest rate changes
• C)can be explained very well by the life-cycle theory, since people spread their durable goods purchases equally over their lifetimes
• D)suggests that expenditures on durable goods do not increase utility as much as expenditures on other consumption goods
• E)none of the above

---

Definitions:

Accounting Records

Documents and books that keep track of all financial transactions of a company, forming the basis for financial statements.

Adjusted Trial Balance

An adjusted trial balance is a list of all the accounts of a company, showing the balances after adjusting entries have been made for accruals, deferrals, and other adjustments.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances in temporary accounts to permanent accounts and to prepare the company's books for the next period.

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.