Chapter 4.1, Problem 2R

To determine

To Check: The reason for people’s debt.

Explanation of Solution

People go into debt due to multiple factors, like overspending habits, high-interest rates, people’s needs, etc. Generally, debt is the result of bad spending. Moreover, credits cards that allow large balance attracts large interest rate and it lands a person into debt very faster. Let’s take an example to understand it better. For example, a person falls sick and he is unable to pay the hospital bills then the person will use the credit card, and using a credit card will lend the person into debt. Thus, it was a need or requirement that induces the person to go into debt.