Which of the Following Statements Is True of the Economy

question 146

Multiple Choice

Which of the following statements is true of the economy in the long run? In the long run,
I. real GDP eventually moves to potential output because all wages and prices are assumed to be flexible.
II. the economy can achieve its natural level of employment and potential output at any price level.
III. there is no cyclical unemployment.

• A) I only
• B) I and II only
• C) I and III only
• D) I, II, and III

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Definitions:

Sustainable Growth

The rate at which a company can grow its sales, earnings, and dividends without increasing its equity or taking on new debt.

Earnings Retention

The portion of a company's profit that is kept or retained rather than distributed to shareholders as dividends.

Total Asset Turnover

A metric indicating how effectively a firm utilizes its assets to produce sales income.

External Financing

Funds that a business obtains from outside sources to cover its operational needs and finance growth, including debt and equity financing.