Kent and Kirsten Are Both Trying to Reduce Their Consumer

question 5

Multiple Choice

Kent and Kirsten are both trying to reduce their consumer debt. Kent decides to pay the highest-interest debts first and freeze credit-card spending. Kirsten simply pays her largest debt first, because this would seem to be the fastest way to move her debt as close to zero as possible. Kent's plan reflects the problem-solving strategy of _____. Kirsten's method illustrates the strategy of _____.

• A)forming subgoals; trial and error
• B)means-end analysis; forming subgoals
• C)trial and error; means-end analysis
• D)forming subgoals; means-end analysis

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Definitions:

Inflation

The pace at which prices for goods and services across the board go up, diminishing the value of money.

Required Rate

The minimum return an investor expects to achieve on an investment, considering its risk level and the opportunity cost of forgoing other investments.

Marginal Cost

Marginal cost refers to the increase or decrease in the total cost of producing one more unit of a good or service.

After-Tax Cost

The actual cost of an investment or loan after accounting for taxation, representing the net expense to the investor or borrower.