Suppose You Read in the Newspaper That a Large Decline

question 73

Essay

Suppose you read in the newspaper that a large decline in business spending has occurred. Explain how this could cause real GDP to fall. Could the decline in business spending also cause potential GDP to decline? Explain.

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Definitions:

Form of Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount to improve cash flow.

Securitizations

The process of pooling various types of contractual debt such as mortgages or loans and selling their related cash flows to third party investors as securities.

Consolidate

The process of combining financial statements from different entities within a group to produce a single set of financial statements.

Control Over Receivables

The management and oversight practices applied to ensure efficient collection of amounts owed to a company.