Suppose the Equilibrium Level of Expenditure Is $13 Trillion

question 348

Multiple Choice

Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $12 trillion, then inventories are ________ their target levels and real GDP will ________.

• A) above; increase
• B) above; decrease
• C) below; increase
• D) below; decrease

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Definitions:

Dividend Level

The amount of dividend payment declared by a company per share, usually expressed in a currency value.

Stock Price

The current price at which a share of a company is trading on the stock market.

Signaling Theory

A concept in economics and finance that suggests that decisions made by companies can convey information to investors and the market about the firm's future prospects.

Dividend Irrelevance

Dividend Irrelevance theory suggests that a company's dividend policy has no effect on either its value or its cost of capital, according to Modigliani and Miller.