Consider the AD/AS Model After Factor Prices Have Fully Adjusted

question 56

Multiple Choice

Consider the AD/AS model after factor prices have fully adjusted to output gaps.A reduction in the level of potential output,with aggregate demand constant,will

• A)leave real output unaffected and increase the price level.
• B)decrease real output and decrease the price level.
• C)decrease real output and leave the price level unchanged.
• D)decrease real output and increase the price level.
• E)increase real output and decrease the price level.

---

Definitions:

Future Dividends

Expected payments made by a corporation to its shareholder members based on future earnings, typically projected by the company’s management or analysts.

Target Payout Ratio

A goal set by a company to distribute a certain percentage of earnings to its shareholders in the form of dividends.

Dividend Payments

Dividend payments refer to the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Signaling Effect

A theory in finance that suggests when a company announces an increase or decrease in dividends, it signals its financial health and prospects to investors.