Suppose That Family a Borrows Money When Its Car Breaks

question 347

Multiple Choice

Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer. Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Florida. Which of the following is correct?

• A)Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on transitory income.
• B)Family A's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. Family B's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income.
• C)Family A's spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. Family B's spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.
• D)Both Family A's and Family B's spending habits suggest that they base their purchasing decisions on permanent income.

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Definitions:

Normal Distribution

A statistical distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Mean

A statistical measure that represents the average value of a set of numbers, calculated by dividing the sum of all values by the number of values.

P < .05

A statistical notation indicating that the probability of the observed data (or something more extreme) given that the null hypothesis is true is less than 5%, suggesting the findings are statistically significant.

Probability

A numerical expression representing the probability of an event happening, ranging from 0 (meaning the event cannot happen) to 1 (meaning the event is certain to happen).