When Aggregate Planned Expenditure Exceeds Real GDP, There Are Unplanned

question 30

Multiple Choice

When aggregate planned expenditure exceeds real GDP, there are unplanned
_{--------------------} in inventories, and firms _{--------------------} production, so that real GDP _{--------------------}.

• A)decreases; decrease; increases
• B)increases; increase; increases
• C)decreases; increase; increases
• D)increases; decrease; decreases
• E)decreases; decrease; decreases

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Definitions:

Sustainable Growth Rate

The highest speed at which a business can expand its profits without having to raise its debt levels or issue more equity.

Retention Ratio

The percentage of net income that is retained to be reinvested in the business, rather than being paid out as dividends.

Dividend Payout Ratio

The percentage of earnings paid to shareholders in dividends, calculated by dividing the total amount of dividends by the net income of the company.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from total revenue.