In the Long Run, What Are the Effects of a Decrease

question 170

Multiple Choice

In the long run, what are the effects of a decrease in the rate of growth of the money supply on the Phillips curves?

• A) It shifts both the long-run and the short-run Phillips curves right.
• B) It leaves the long-run Phillips curve unchanged and the short-run Phillips curve right.
• C) It shifts the long-run Phillips curve right and the short-run Phillips curve left.
• D) It leaves the long-run Phillips curve unchanged and shifts the short-run Phillips curve left.

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Definitions:

Internal Growth Rate

The maximum growth rate a firm can achieve without external financing, driven by its own operations and reinvested earnings.

Debt-Equity Ratio

A financial ratio portraying the comparative financing approach using debt and equity for assets.

Plowback Ratio

The proportion of earnings that a company retains and reinvests into its operations rather than distributing as dividends.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, expressed as a percentage.