If a Large Decrease in the Cost of Capital Leads

question 41

Multiple Choice

If a large decrease in the cost of capital leads to a firm increasing the labor it uses

• A)then the output effect outweighs the substitution effect.
• B)the substitution effect outweighs the output effect.
• C)the substitution and output effects are equal.
• D)there is no way to determine the relative strengths of the output and substitution effects.

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Definitions:

Turnover

The rate at which employees leave a workforce and are replaced by new personnel.

Absenteeism

The habitual non-presence of an employee at their job, which can be due to various reasons, including illness, personal issues, or dissatisfaction with the work environment.

Organizational Learning

Refers to the process by which an organization “learns” from past mistakes and adapts to its environment.

Organizational Pluralism

An approach within organizations that promotes diversity, inclusivity, and coexistence of multiple cultures, viewpoints, and practices.