Suppose Mike and Renee Are the Only Two People in a Very

question 47

Multiple Choice

Suppose Mike and Renee are the only two people in a very simple economy and that they produce and exchange two goods,soda and pretzels.Which of the following might cause a recession in this simple economy?

• A) Mike gets the idea that Renee wants more soda,which Mike produces.
• B) Renee gets the idea that Mike wants more pretzels,which she produces.
• C) Mike gets the idea that Renee wants less soda,which he produces.
• D) Renee gets the idea that Mike wants less soda,which he produces.
• E) The production of pretzels being equal to the production of soda.

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Definitions:

Cash Dividend

A payment made by a company out of its earnings to shareholders in the form of cash.

Retained Earnings

The portion of net income left over after dividends have been distributed to shareholders, reinvested into the company.

Board of Directors

A group of individuals elected by shareholders to oversee the management and make strategic decisions for a corporation.

Operating Cycle

The average period of time between the purchase of inventory and the receipt of cash from accounts receivable, representing the length of time a company's capital is tied up.