If the Firm's Rate of Return on Its Assets Is

question 116

Multiple Choice

If the firm's rate of return on its assets is _____ than the cost of borrowing, then the owners' rate of return on equity will _____ as the firm uses _____ debt.

• A) less; decrease; less
• B) greater; decrease; more
• C) greater; increase; more
• D) less; increase; more

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Definitions:

GDP Deflator

An economic metric that converts output measured at current prices into constant-dollar GDP by accounting for inflation.

Real GDP

Real GDP is the total value of all goods and services produced in a country, adjusted for inflation or deflation.

Real GDP

An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year, expressed in base-year prices, to reveal the true growth rate.

Intermediate Good

A product used to produce a final good or finished product, also known as a semi-finished product.