If Consumers Experience an Increase in Lifetime Income, Current Spending

question 41

Multiple Choice

If consumers experience an increase in lifetime income, current spending will ________, current saving will ________, and future spending will ________.

• A) increase; increase; increase
• B) increase; decrease; decrease
• C) increase; decrease; increase
• D) increase; increase; decrease
• E) decrease; increase; increase

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Definitions:

Residual Income

Residual income is the profit remaining after deducting all required costs of capital from operating income.

Margin

Typically refers to the difference between the selling price of a product and its cost, used to measure profitability.

Turnover

The rate at which inventory or assets are sold and replaced or the rate at which employees are replaced in a business.

Residual Income

The amount of income that an investment or project generates above the minimum rate of return.