Which of the Following Is a Reason That Consumption Depends

question 53

Multiple Choice

Which of the following is a reason that consumption depends on current income, and not just on total wealth?

• A) The anticipation of future financial distress makes some people reluctant to borrow.
• B) Low income people may prefer to postpone some consumption until later years, when their incomes are higher.
• C) Banks will not always lend money to those who want to consume more than their income.
• D) All of the above.
• E) None of the above.

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Definitions:

Interest Rate

The percentage of a loan amount charged by the lender to the borrower for the use of assets, typically expressed as an annual rate.

Consumes

The action of using up a good or service to satisfy needs or wants.

Consumption

The process by which goods and services are used up by consumers, representing the end phase of the economic cycle.

Income

Financial gains, customarily on a constant basis, from vocational activities or investments.