To solve this problem, let's analyze the changes in both assets and liabilities from 2007 to 2008.
First, let's define the terms clearly:
- Assets: Resources owned that add value, such as savings and valuable items.
- Liabilities: Debts or obligations that need to be repaid, such as loans and credit card debt.
### Analysis for 2007
- Car loan: \[tex]$5,000 (Although technically this is a liability, let's include it in the analysis for completeness)
- Savings: \$[/tex]2,000
- Credit card debt: \[tex]$1,500
Assets in 2007:
- Car value = \$[/tex]5,000
- Savings = \[tex]$2,000
- Total assets = \$[/tex]5,000 (car) + \[tex]$2,000 (savings) = \$[/tex]7,000
Liabilities in 2007:
- Credit card debt = \[tex]$1,500
### Analysis for 2008
- Car loan: \$[/tex]1,000 (Remaining balance, showing a decrease in liability compared to the previous year)
- Savings: \[tex]$2,000 (Assuming savings didn't change)
- Credit card debt: Not explicitly mentioned for this year, so let's assume it remains \$[/tex]1,500
Assets in 2008:
- Savings = \[tex]$2,000 (remaining the same as in 2007)
- Car loan reduction implies a corresponding decrease in total car asset value since the debt pays off: \$[/tex]1,000
- Total assets = \[tex]$1,000 (remaining car loan) + \$[/tex]2,000 (savings) = \[tex]$3,000
Liabilities in 2008:
- Reduced car loan to \$[/tex]1,000 suggests total liabilities dropped by the difference
- Initial liability was \[tex]$1,500 (credit card debt), same as in 2007
### Net Changes
- Assets change: \$[/tex]3,000 (2008) - \[tex]$7,000 (2007) = -\$[/tex]4,000 (decreased)
- Liabilities change: \[tex]$1,500 (2007) - \$[/tex]1,000 (2008 remaining debt) = +\[tex]$500 (increased liabilities)
Considering the results:
- Assets decreased by \$[/tex]4,000.
- Liabilities increased by \$500.
Thus, from 2007 to 2008, assets decreased and liabilities increased. Therefore, the correct choice is:
c. From 2007 to 2008, assets decreased and liabilities increased.
Hence, the best answer from the choices provided is C.
