If a Firm Adopts a Residual Distribution Policy, Distributions Are

question 8

True/False

If a firm adopts a residual distribution policy, distributions are determined as a residual item. Therefore, the better the firm's investment opportunities, the lower its distributions should be.

---

Definitions:

Classical Economists

A group of 18th- and 19th-century economists who believed that economic downturns corrected themselves through natural market forces; thus, they believed the economy was self-correcting and needed no government intervention.

John Maynard Keynes

An influential British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

Expansionary Gap

A situation where actual output in an economy exceeds the potential output, leading to inflationary pressures due to high demand.

Government Spending

The total amount of money that a government allocates and uses on public services and infrastructure.