An Economic Model

question 109

Multiple Choice

An economic model:

• A)is useful for explaining past economic conditions but not for predicting future outcomes.
• B)often leads to faulty conclusions because of the ceteris paribus assumption.
• C)allows nothing to change in the economic situation that is being described.
• D)is a simplified version of reality used to understand real-world economic conditions.

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, giving shareholders voting rights and a share in the company's profits through dividends.

Retained Earnings(Deficit)

The accumulated net income of a company minus any dividends paid to shareholders, reflecting the company's earnings reinvested in its operations.

Stock Split

An action by a company to increase the number of outstanding shares by dividing each share, which typically reduces the share price but does not change the overall market capitalization.

Shares Outstanding

The total number of a company's shares of stock that are currently owned by shareholders, including restricted shares.