Question

Ellie and Vince are a married couple, both with college degrees and jobs. How would you expect each of the following events to affect the amount they save each month? a. Ellie learns she is pregnant. Saving will increase b. Vince reads in the paper about possible layoffs in his industry Saving will decrease c. Vince had hoped that his parents would lend financial assistance toward the couple's planned purchase of a house, but he learns that they can't afford it. Saving will Click to select increase decrease d. Ellie announces that she would like to go to law school in the next few years. Saving will Click to select . e A boom in the stock market greatly increases the value of the couple's retirement funds Saving will (Click to select Vince and Ellie agree that they would like to leave a substantial arhount to local charities in their wills Saving will (Click to select

Answer 1

1) Solution: Saving will increase

Explanation: Ellie and Vince is likely to increase their current saving due to the life-cycle reasons i.e. future anticipations such as child-care tuitions and other expenses

　

2) Solution: Saving will increase

Explanation: The risk layoff of Vince has increased, thus couple must increase their saving for precautionary reasons

　

3) Solution: Saving will increase

Explanation: To meet a life-cycle objective, more savings is required

　

4) Solution: Saving will increase

Explanation: Now the couple faces a fall in their income and tuition expenses in a few years, they need more saving is required for a life-cycle objective

　

　

5) Solution: Saving will decrease

Explanation: To know the life-cycle motive of retirement, less savings is required

　

6) Solution: Saving will increase

Explanation: The couple should increase savings for bequest reasons.