The Computation of the Poverty Line

question 13

Multiple Choice

The computation of the poverty line:

• A)is based on the observation that lower-income families spend about one-third of their incomes on food.
• B)is based on the cost of a subsistence bundle of goods devised by social workers.
• C)has reflected the effects of inflation over the past two decades.
• D)is an absolute measure rather than a relative measure.
• E)includes all of the above.

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Definitions:

Residual Dividend Theory

A policy where dividends are based on earnings left over after all operating and expansion expenses are covered.

Capital Budgeting

The process of planning and evaluating expenditures on assets whose returns are expected to extend beyond one year.

Earnings

The amount of profit that a company produces during a specific period.

Signaling Effect

The signaling effect is a theory in economics and finance suggesting that actions taken by a company, such as dividend announcements or share repurchases, send signals to the market about the company’s financial health and prospects.