Which of the Following Is an Example of the Precautionary

question 50

Multiple Choice

Which of the following is an example of the precautionary motive for saving?

• A)Pat puts $400 per month in his 401(k)retirement account.
• B)Jordan sets aside $200 per month in case she has to pay for a new roof for her house.
• C)Gerry and Terry put $2,000,000 in a trust fund that will go to their children when the parents die.
• D)Every month, Chris puts $400 into his saving account so that he can buy a new car in a few years.

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Definitions:

Substitutes

Goods or services that can be used in place of each other, where an increase in the price of one leads to an increase in demand for the other.

Relatively Inelastic

Describes a situation where the demand or supply for a good or service changes only slightly in response to changes in price.

Price Elastic

Refers to a situation where the demand or supply for a product or service significantly changes in response to its price change.

Soft Drinks

Non-alcoholic beverages that are usually carbonated and contain various flavorings and sweeteners.