Which of the Following Is a Defining Assumption of the AD/AS

question 17

Multiple Choice

Which of the following is a defining assumption of the AD/AS macro model in the short run?

• A)Factor supplies are assumed to be flexible.
• B)Technology used in production is endogenous and variable.
• C)The level of potential output fluctuates with the price level.
• D)Factor prices are assumed to be exogenous.
• E)Firms cannot operate near their normal capacity.

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Definitions:

Residual Dividend Policy

A strategy whereby companies pay dividends from the residual or leftover equity only after all project capital needs are met.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, expressed as a percentage of the company's total net income.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

Record Date

The date set by a company on which you must be on the company's books as a shareholder to receive a declared dividend or participate in corporate actions.