The Substitution Effect That Results from a Decrease in Total

question 21

Multiple Choice

The substitution effect that results from a decrease in total factor productivity

• A) is a shift from the labour input to the capital input.
• B) involves substitution of government spending for consumption.
• C) substitutes lump sum taxes for taxes on firms.
• D) is zero.
• E) is the substitution of consumption for leisure.

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Definitions:

Debt-to-equity Ratio

This proportion demonstrates the relative use of debt and shareholders' equity in the capital funding of a company's assets.

Receivable Turnover

A financial metric indicating how efficiently a company collects cash from credit sales by measuring the number of times average accounts receivable are collected over a period.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period, indicating efficiency in managing stock.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term and long-term obligations, calculated as current assets divided by current liabilities.