As Firms Raise Output in Response to Rising Aggregate Demand

question 39

Multiple Choice

As firms raise output in response to rising aggregate demand,

• A) resources become scarce, wages eventually rise, and a point is reached beyond which output cannot expand
• B) they become increasingly efficient and are thus able to pass the cost savings on to consumers in the form of lower prices
• C) real wages fall, interest rates rise, and consumers buy less
• D) they hire fewer workers and substitute capital for labor
• E) the level of nominal GDP falls, though real GDP rises

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Definitions:

DFL-EPS Analysis

DFL-EPS Analysis assesses the effect of financial leverage on a company’s earnings per share, showing how earnings fluctuate with sales changes.

EBIT-EPS Analysis

A technique used in financial analysis to determine the impact of different financing options on a company's earnings per share and earnings before interest and taxes.

DOL-EPS Analysis

A methodology to assess the Degree of Operating Leverage and its impact on a company's Earnings Per Share under different sales volume scenarios.

Business Performance

A measure of how effectively a company uses its resources to achieve its objectives and fulfill stakeholder expectations.