Use the Figure Below to Answer the Following Questions

question 46

Multiple Choice

Use the figure below to answer the following questions.

Figure 28.2.2
-Refer to Figure 28.2.2. If SAS shifts from SAS₀ to SAS₁, then

• A)inflation is expected to be 10 percent.
• B)inflation will be 10 percent.
• C)potential GDP will decrease
• D)unemployment will fall.
• E)deflation occurs.

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Definitions:

Return on Assets

A financial ratio indicating how profitable a company is relative to its total assets.

Weighted Average Cost of Capital

An average representing the expected return on all of a company's securities, weighted according to the proportion each contributes to the total capital structure.

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk.

Levered Firms

Companies that use debt in their capital structure alongside equity.