The "Pigou Effect" Is the Stimulus to Aggregate Demand When

question 54

Multiple Choice

The "Pigou effect" is the stimulus to aggregate demand when a lower price level causes

• A)a lower interest rate to increase fixed investment.
• B)a lower interest rate to increase inventory investment.
• C)a lower interest rate to increase the demand for consumer durables.
• D)holdings of money to increase in purchasing power,thus raising consumption demand.

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Definitions:

Profitability Index

A capital budgeting tool that measures the ratio of the present value of future cash flows from an investment to the investment's initial cost.

Mutually Exclusive

Situations or events that cannot both occur at the same time.

Net Present Value

A financial metric that calculates the present value of all cash flows, both incoming and outgoing, of an investment.

Managers

People in charge of managing or overseeing any or all parts of a corporation or comparable entity.