Suppose That Family a Borrows Money When Its Car Breaks

question 111

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 Washington. 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:

Capital Infusions

The injection of funds into a business or organization, typically to support growth or stabilize financial health.

Pressured Atmosphere

A condition where the air pressure is significantly different from the normal atmospheric pressure, often caused by altitude, weather conditions, or contained environments.

Piecework Payments

A form of compensation based on the amount of work completed rather than time spent, common in manufacturing and often incentivizing higher production rates.

Workplace

The location or environment where people are employed and work is carried out, including offices, factories, stores, etc.