Foreign Repercussions of Changes in Domestic Spending May Cause

question 72

Multiple Choice

Foreign repercussions of changes in domestic spending may cause:

• A) the GDP gap to be larger than the recessionary gap.
• B) the equilibrium income to increase by an amount equal to the change in net exports.
• C) the actual spending multiplier to be larger than the reciprocal of the marginal propensity to save plus the marginal propensity to import.
• D) equilibrium income to rise by a smaller amount than evidenced by the multiplier effect of autonomous spending increase.
• E) the real GDP to be larger than potential GDP.

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Definitions:

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, indicated on the balance sheet.

Net Income

The conclusive profit of a corporation post-deduction of all operational costs and taxation from the aggregate revenue.

Cash Dividends

Payments made by a corporation out of its earnings to its shareholders, usually in the form of cash.

Stock Dividends

A payment made to shareholders in the form of additional shares, rather than cash.