Mehdi Operates a Sole Proprietorship,but He Is in Poor Health

question 186

Multiple Choice

Mehdi operates a sole proprietorship,but he is in poor health and may be unable to continue running the business.If Mehdi becomes incapacitated,his business:

• A)automatically continues under new management as a sole proprietorship.
• B)automatically converts into a public corporation with stock sold to interested investors.
• C)ceases to exist unless sold or taken over by Mehdi's heirs.
• D)becomes the property of the most senior employee who wishes to continue operating the firm.

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Definitions:

Crowding-out Effect

A situation where increased government spending leads to a reduction in private sector investment, due to the government borrowing absorbing a larger share of available financial resources.

Expansionary Fiscal Policy

involves government spending and tax cuts to stimulate the economy during a recession.

Net Investment Spending

Represents the total amount spent on new capital assets minus the depreciation of existing assets, indicating how much a company is investing in its future growth.

Fiscal Policy

Government policies regarding taxation and spending to influence the economy.