When Economists Use the Term Ceteris Paribus, They Indicate

question 101

Multiple Choice

When economists use the term ceteris paribus, they indicate

• A) the causal relationship between two economic variables cannot be determined.
• B) the analysis is true for the individual but not for the economy as a whole.
• C) all other factors are assumed to be constant.
• D) their conclusions are based on normative economics rather than positive economic analysis.

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Definitions:

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue; often referred to as the "bottom line."

Indirect Method

A method used in cash flow statement preparation that adjusts net income for non-cash transactions, deferrals, and accruals.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against an asset since it was put into use, reducing its book value.

Investing Activity

Financial transactions related to the acquisition or disposal of long-term assets and investments, reflected in a company's cash flow statement.