Christina Believes That Shifts in Aggregate Demand Cause a Change

question 241

Multiple Choice

Christina believes that shifts in aggregate demand cause a change in both real output and the price level. She believes that an economic recession will not necessarily self-correct in the long run, and therefore she believes that active fiscal and monetary policy is justified to smooth out the business cycle. Christina is best described as a:

• A)classical economist.
• B)Keynesian.
• C)supply-sider.
• D)monetarist.

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Definitions:

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate them for the risk they undertake by investing their capital.

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but kept back to reinvest in the business.

DCF Approach

The Discounted Cash Flow (DCF) approach involves estimating the present value of an investment based on its expected future cash flows, adjusting for the cost of capital.

Cost of Equity

The rate of return a company is expected to pay to its shareholders to compensate them for the risk of investing in the company.