The Substantial Increase in Household Debt Relative to Income Since

question 41

Multiple Choice

The substantial increase in household debt relative to income since the mid 1980s meant that in 2008 many households

• A) had little savings or other reserve assets for use to deal with unexpected expenditures.
• B) could safely afford to purchase larger homes because housing is always a good investment.
• C) could spend everything they earned because their interest obligations on outstanding credit were low.
• D) would be able to easily adjust their current spending if their monthly payments on adjustable rate mortgages rose.

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Definitions:

Cash Sales

Transactions in which a customer pays for goods or services at the point of sale with cash, resulting in immediate revenue for the seller.

Cash Receipts Journal

The special journal in which all cash receipts are recorded.

Compensating Balance

A minimum account balance that a company must maintain as part of an agreement with a lender, often to secure a loan or line of credit.

Cash Balance

The amount of money on hand and available in a company's bank accounts at any given time.