Macroeconomic Equilibrium Is Stable in the Simple Model Because

question 32

Multiple Choice

Macroeconomic equilibrium is stable in the simple model because

• A) consumption falls more slowly than income when GDP is above equilibrium.
• B) consumption increases more slowly than income when GDP is below equilibrium.
• C) the marginal propensity to consume is less than unity.
• D) taxes cause disposable income to move at some fraction of the pace at which GDP moves.
• E) all of the above.

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Definitions:

Retained Earnings

Retained earnings are the portion of a company's profits that are kept or reinvested in the business instead of being distributed to shareholders as dividends.

Weighted-average Shares

A calculation used in accounting and finance to determine the average number of shares outstanding in a company, adjusted for stock splits and other changes.

Price-earnings Ratio

A financial metric comparing a company's market price per share to its earnings per share, indicating the value given by the market for each dollar of earnings.

Price-earnings Ratio

The price-earnings ratio, or P/E ratio, measures a company's current share price relative to its per-share earnings, indicating the market's valuation of a company's growth potential.