Moving Down Along a Given Budget Line,real Income

question 83

Multiple Choice

Moving down along a given budget line,real income

• A)decreases but prices remain constant.
• B)and prices are constant.
• C)decreases and prices decrease.
• D)increases but prices remain constant.
• E)remains constant but prices decrease.

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Definitions:

Price Appreciation

The increase in the value of an asset or investment over time, not including the dividends or interest earned.

Current Income

The total amount of money earned within a specific time period, including wages, dividends, and interest.

Clientele Effect

The theory suggesting that changes in dividend policy will attract a different class of shareholders or cause the current shareholders to sell their shares.

Residual Dividend Theory

The idea that corporations pay dividends with whatever money is left over out of earnings after all projects with a positive NPV are undertaken.