Which of the following is NOT a reason firms and individuals borrow?
A) They want to smooth consumption.
B) Debt is often necessary for large purchases.
C) They believe their return will be greater than the interest rate.
D) They desire to have equal income and spending every period.

Question

Quizplus · Accepted Answer

The desire to have equal income and spending every period is not a reason for firms and individuals to borrow. Borrowing allows for spending to exceed income in certain periods, and then repay the debt in future periods when income is higher.

Which of the Following Is NOT a Reason Firms and Individuals