Sam, the Owner of a Small Company, Learned That a Competitor

question 148

Multiple Choice

Sam, the owner of a small company, learned that a competitor was planning to spend $150,000 on promotion in the next financial year. As soon as he learned this, Sam called his finance manager and said, "I want to spend $150,000 on promotion next year." In this case, which method of promotional budgeting is used by Sam?

• A) the objective-and-task method
• B) the percentage-of-sales method
• C) the competitive-parity method
• D) the bottom-up method
• E) the pull-push method

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Definitions:

Modern Monetarists

Economists who follow the monetarist school of thought, focusing on the role of governments in controlling the amount of money in circulation.

Nominal Money Supply

The amount of money circulating in an economy without adjusting for inflation.

Inflation

The rate at which the general level of prices for goods and services is rising, and, consequently, the purchasing power of currency is falling.

Rational Expectations

An economic theory which suggests that individuals form forecasts about the future based on all available information, thereby influencing markets and potentially policy effectiveness.