One Difficulty with Any Explanation of Economic Fluctuations Based on a Shift

question 4

Multiple Choice

One difficulty with any explanation of economic fluctuations based on a shift in labor supply is that

• A) workers' preferences tend to change very quickly
• B) labor supply shifts all the time without causing recessions or expansions
• C) labor supply is difficult to measure
• D) workers' preferences tend to change very slowly
• E) the unemployment rate changes during economic fluctuations

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Definitions:

MM Model

Refers to the Modigliani-Miller theorem, which proposes that under certain market conditions and assumptions, the value of a firm is unaffected by its capital structure.

Bankruptcy Risk

The likelihood that a company will be unable to meet its financial obligations and may have to declare bankruptcy.

Debt Financing

Raising funds through borrowing, typically by issuing bonds or taking out loans, which must be repaid at a later date, usually with interest.

Cash Preservation

The practice of managing resources to ensure sufficient liquidity and minimize financial risk.