Consumption Is Most Likely to Respond One-For-One with Changes in Current

question 64

Multiple Choice

Consumption is most likely to respond one-for-one with changes in current income when

• A)the change in current income results from a one-time bonus.
• B)people believe the change in their current income is temporary.
• C)people are able to borrow as much as they wish, as long as they pay it back.
• D)the change in current income is caused by the business cycle.
• E) none of the above

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Definitions:

Horizontal Analysis

An analysis technique that evaluates trends over time by comparing financial statement line items or ratios across multiple periods.

Financial Statement Data

Information presented in financial statements, including the balance sheet, income statement, and cash flow statement, to inform users about a company's financial status.

Percent Of Fixed Assets

A financial ratio that indicates what portion of a company's total assets are made up of fixed assets, such as property, plant, and equipment.

Vertical Analysis

This is a method in financial statement analysis where each line item is listed as a percentage of another item. For income statements, each expense is presented as a percentage of sales, and on the balance sheet, each asset, liability, or equity is presented as a percentage of total assets.