If People's Expectations About Future Income Improve So They Think

question 148

Multiple Choice

If people's expectations about future income improve so they think their future income will be higher than previously believed,then the AD curve

• A)and the AS curve will both shift leftward because people will increase their saving.
• B)will not shift,but potential GDP will increase.
• C)will not change until income actually rises.
• D)will shift rightward because people will increase spending now.
• E)will shift leftward because people will spend less now.

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Definitions:

Capital Structure

The combination of a firm's long-term loans, particular short-term borrowings, ordinary shares, and preferred shares, which represents how a company funds its general activities and expansion.

Dividends

Distributions of earnings given to shareholders by a corporation, generally from its profits.

Unlevered Cost

The cost of financing a project or investment without considering the effects of leverage or borrowing.

Capital

Financial assets or the financial value of assets, such as cash, used by a business to fund its operations and investments.