Which of the Following Is an Example of Built-In Stability

question 7

Multiple Choice

Which of the following is an example of built-in stability? As real GDP decreases, income tax revenues

• A) increase and transfer payments decrease.
• B) decrease and transfer payments increase.
• C) and transfer payments both decrease.
• D) and transfer payments both increase.

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Definitions:

Earnings Per Share

A financial metric calculated by dividing a company's profit available to common shareholders by the average number of outstanding shares, indicating the profitability per share.

Stock Split

The division of a company's existing stock into multiple shares to boost the liquidity of the shares, although the market capitalization remains the same.

SFAS No.123

An accounting standard issued by the Financial Accounting Standards Board (FASB) related to the expensing of stock options, specifying how companies should account for stock-based compensation.

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price within a specific time frame.