Which of the Following Is a Reason That Consumption Depends

question 35

Multiple Choice

Which of the following is a reason that consumption depends on current income,and not just on total wealth?

• A)banks will not always lend money to those who want to consume more than their income.
• B)the anticipation of future financial distress makes some people reluctant to borrow.
• C)low income people may prefer to postpone some consumption until later years,when their incomes are higher.
• D)all of the above
• E)none of the above

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Definitions:

Noncumulative Preferred Stock

A type of preferred stock that does not accumulate unpaid dividends; if a dividend is skipped, it is not required to be paid later.

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders but reinvested in the business or kept as a reserve.

Par Value

The face value of a bond or stock as stated by the issuer, which may differ from its market value.

Cash Dividend

A payment made by a company out of its earnings to its shareholders, usually in the form of cash.