In the Basic AD/AS Macro Model,the "Paradox of Thrift" Is

question 118

Multiple Choice

In the basic AD/AS macro model,the "paradox of thrift" is only a short-run phenomenon because

• A)consumers exhibit cyclical consumption behaviour.
• B)in the long run output is determined by potential output.
• C)savings are transformed into expenditures in the long run.
• D)the marginal propensity to consume is fixed in the long run.
• E)consumers base their consumption expenditures only on their lifetime income.

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Definitions:

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.

Total Current Assets

The sum of all assets likely to be converted into cash within a year, including cash, marketable securities, accounts receivable, and inventory.

Total Current Liabilities

These are obligations that a company is required to pay within one year or within the normal operating cycle.

Working Capital

The variance between a business's immediate assets and its short-term obligations, signalling its ability to meet short-term debts.