Which of the Following Will Cause the LM Curve to Shift

question 25

Multiple Choice

Which of the following will cause the LM curve to shift down?

• A)a reduction in the expected future interest rate
• B)a reduction in current income
• C)a reduction in expected future taxes
• D)all of the above
• E) none of the above

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Definitions:

Negative NPV

A situation where the net present value (NPV) of a project or investment is less than zero, indicating that the projected cash flows are insufficient to cover the initial investment.

Discounted Payback Period

The discounted payback period is the time it takes for an investment to generate cash flows sufficient to recover its initial cost, taking the time value of money into account.

Discounted Cash Flows

A valuation method used to estimate the value of an investment based on its future cash flows, adjusted for the time value of money.

Average Accounting Return

A financial ratio that represents the average annual income as a percentage of the initial investment, used in capital budgeting to estimate the profitability of potential investments.