Suppose that Family A borrows money when its car breaks down and saves money when the wife receives a holiday bonus from her employer. Suppose that Family B borrows money to buy elaborate birthday presents for the children and spends the husband's holiday bonus on a vacation to Florida. Which of the following is correct?

a$.$ Family A$\text{'}$s spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income. Family B$\text{'}$s spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income.

b$.$ Both Family A$\text{'}$s and Family B$\text{'}$s spending habits suggest that they base their purchasing decisions on transitory income.

c$.$ Family A$\text{'}$s spending habits suggest that it bases its purchasing decisions on transitory income rather than permanent income. Family B$\text{'}$s spending habits suggest that it bases its purchasing decisions on permanent income rather than transitory income

d. none of these

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct answer is c Family As spend... View the full answer