Consider a Two-Year Period Where a Consumer Has an Income

question 20

Multiple Choice

Consider a two-year period where a consumer has an income of $10,000 in year 1 and $8,000 in year 2.The consumer can borrow or lend at a rate of 10 percent.If the consumer decides to save $1,000 in year 1,it means:

• A)his consumption will be equal in both years.
• B)he will have a higher consumption in year 2 than in year 1.
• C)he considers consumption in year 1 as an inferior good.
• D)the cost of future consumption will increase.

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Definitions:

Common Stock

Equity ownership in a corporation, representing a claim on its dividends and assets, with voting rights at shareholders' meetings.

Net Loss

The result when a company's expenses exceed its revenues over a specific period, leading to a negative income.

Stock Dividend

A dividend payment made by a company to its shareholders in the form of additional shares, rather than cash.

Reacquired

Refers to assets or shares that a company buys back from investors or shareholders.