If Consumption Spending Is Larger Than Disposable Income

question 232

Multiple Choice

If consumption spending is larger than disposable income,

• A)saving is positive.
• B)dissaving occurs.
• C)saving is exactly zero.
• D)a depression results.
• E)this cannot occur.

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Definitions:

Nominal Interest Rate

The interest rate which is advertised or stated, without adjustment for the full effects of compounding or inflation.

Semiannual Compounding

The process of applying interest to a principal sum twice a year, leading to interest being earned on interest.

Periodic Interest Rate

The interest rate applied over a specific time period, crucial for calculating interest in savings and loan scenarios.

Present Value

The value today of a future amount of money or sequence of cash payments, calculated using a designated return rate.