Recall Application 2, "Using Long-Term Macro Data to Measure Multipliers

question 62

Multiple Choice

Recall Application 2, "Using Long-Term Macro Data to Measure Multipliers," to answer the following questions:
-According to the application, the reason why other studies found a strong correlation between government spending and GDP was:

• A) because government spending increased in response to an increase in GDP.
• B) because the increase in GDP was caused by an increase in government spending.
• C) because government spending lowered interest rates and increased investments.
• D) A and C are correct.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the ownership stake of shareholders.

Working Capital

The discrepancy between a company's immediate assets and its short-term obligations, revealing the available liquidity for operating activities.

Plant and Equipment

Physical assets used in the operation of a business, including machinery, buildings, and vehicles.

Current Ratio

A financial metric that measures a company's ability to cover its short-term obligations with its short-term assets, indicating liquidity.