What Effect Will the Combination of a Decrease in the Capital

question 45

Multiple Choice

What effect will the combination of a decrease in the capital stock and increasingly costly government regulations have on LRAS?

• A)It will shift LRAS to the left.
• B)It will shift LRAS to the right.
• C)It will leave LRAS unchanged.
• D)It will have an indeterminate effect on LRAS.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, which does not necessarily match the market value.

Treasury Stock

Shares of a company's own stock that it has reacquired but has not retired, which can be resold or used for other corporate purposes.

Paid-in Capital

The amount of money that shareholders have invested in the company through the purchase of its stock, over and above the par value of the shares.

Par Value

The face value of a bond or stock as stated in the corporate charter, which is the minimum amount the security can be sold for upon its initial offering.