If the Advice of Those Who Favor a Passive Approach

question 122

Multiple Choice

If the advice of those who favor a passive approach to policy is correct, how would a contractionary gap eventually close?

• A)The aggregate demand curve would shift rightward.
• B)The aggregate demand curve would shift leftward.
• C)The short-run aggregate supply curve would shift rightward.
• D)The short-run aggregate supply curve would shift leftward.
• E)There would be a movement upward along the aggregate demand curve.

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Definitions:

Free Trade Credit

This describes the period during which a buyer can delay payment for goods or services received, without incurring any penalty or interest cost.

DSO

Days Sales Outstanding (DSO) is a financial metric that calculates the average time in days that a company takes to collect payment after a sale has been made, indicating the efficiency of the company's credit and collections policies.

CCC

Cash Conversion Cycle, a metric that shows the time span between a company's outlay of cash for materials and receiving payment from the sale of goods.

Permanent Net Operating Working Capital

The continuous investment in operating working capital that is not expected to fluctuate over the business cycle.