The Accelerator Theory Can Explain the Paradox That Both Interest

question 79

Multiple Choice

The accelerator theory can explain the paradox that both interest rates and investment rise and fall in concert during the business cycle if

• A)the effect of changes in Y effect on In dominate the effect of interest rates on investment.
• B)the LM curve is constant.
• C)the IS curve is constant.
• D)the effect of changes in interest rates on In dominate the effect of changes in Y on In.

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Definitions:

Treasury Stock

Shares that were issued and subsequently reacquired by the company, reducing the amount of outstanding stock on the open market.

Undervalued

A situation where a securities price is considered to be below its intrinsic value, making it an appealing investment opportunity.

Net Income

The amount of money a company earns after subtracting all expenses, taxes, and losses, indicating the company's profitability over a time period.

Net Capital

The amount of capital that a company has after subtracting its liabilities from its assets, often used in financial analysis to assess a company's financial health.