Which of the Following Events Would Cause the AE Function

question 6

Multiple Choice

Which of the following events would cause the AE function to shift upwards in a parallel way?

• A)an increase in the MPC
• B)a decrease in the net tax rate
• C)a decrease in the business confidence of firms
• D)a decrease in foreign income
• E)a decrease in the aggregate price level

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Definitions:

Dividend Decision

The decision by management regarding the portion of earnings paid to shareholders as dividends. The alternative is to retain the money, investing it in the company for future growth.

Cash Dividends

Distributions made to shareholders by a company, often in the form of profit sharing.

Retain Earnings

Profits kept in the company to reinvest in the business or pay down debt, not distributed to shareholders.

Dividend Policy

The strategy a company uses to decide how much it will pay out to shareholders in dividends.