One Implication of a Straight-Line Aggregate Expenditures Curve Is That

question 249

Multiple Choice

One implication of a straight-line aggregate expenditures curve is that the

• A) marginal propensity to consume is constant.
• B) average propensity to consume is constant.
• C) average propensity to save is constant.
• D) marginal propensity to save increases as income increases.

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Definitions:

Dividend Payout Ratio

The portion of earnings paid to shareholders in dividends, calculated as total dividends divided by net income.

External Financing Need

The additional funding required by a firm to finance its expansion or growth projects beyond what it can generate from internal operations.

External Financing Needed

The amount of funding a company must seek from outside sources to finance its planned growth or investment activities, beyond what can be funded by retained earnings or internal operations.

Retains

Refers to the portion of earnings or profits that a company decides to keep rather than distribute to shareholders as dividends, often used for reinvestment.