If Households Expect an Increase in Their Future Incomes, They

question 89

Multiple Choice

If households expect an increase in their future incomes, they will save

• A)less and consume more today.
• B)and consume more today.
• C)more and consume less today.
• D)and consume less today.

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Definitions:

Return Requirement

The minimum expected rate of return necessary for an investment to be considered worthwhile by an investor, reflecting the risk level.

Annual Cash Flows

The total amount of money being transferred into and out of a business over the course of a year, indicative of its operational efficiency and profitability.

Ordinary Annuity

A series of equal payments made at the end of consecutive periods over a fixed length of time.

Annuity Due

A series of equal payments made at the beginning of consecutive periods over a fixed length of time.