If Book Equity Increases by $2,000,the Firm Does Not Issue

question 31

Multiple Choice

If book equity increases by $2,000,the firm does not issue new equity,and its net income is $2,500,then:

• A) the firm paid a dividend of $500.
• B) the firm plowed $500 back into the company.
• C) $500 went into retained earnings.
• D) debt increased by $2,000.

Understand the principles of rational expectations theory and its criticisms.

Know the macroeconomic policies implemented during the Great Recession and their effects.

Identify the differing views of economic schools of thought on government intervention during economic downturns.

Comprehend the role of monetary factors in influencing economic conditions according to monetarists.

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Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.

Opportunity Cost

The relinquishment of possible advantages from alternate options upon making a choice.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, measured by the area above the supply curve and below the price level.

Demand

The desire to purchase goods and services backed by the ability and willingness to pay a certain price.