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Explain the Logic According to Liquidity Preference Theory by Which

question 29

Essay

Explain the logic according to liquidity preference theory by which an increase in the money supply changes the aggregate demand curve.


Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its sales, earnings, and dividends without increasing its leverage or equity.

Dividend Payout Ratio

The fraction of net earnings a firm pays out to its shareholders in dividends, indicating how much money a company returns to shareholders versus reinvesting.

Financial Statement

An official documentation detailing the fiscal transactions and status of a company, individual, or another entity.

Retention Ratio

The portion of net income that is retained by a corporation rather than distributed to its shareholders as dividends.

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