Refer to the Following Figure When Answering

question 104

Multiple Choice

Refer to the following figure when answering
Figure 12.2: IS-MP Curve
-Consider the economy presented in Figure 12.2. If there is a sharp increase in consumer confidence, the economy moves from ________. To prevent a ________, the Fed ________, and the economy moves from ________.

• A) point a to d; recession; lowers interest rates; point d to b
• B) point a to d; recession; lowers interest rates; point d to c
• C) point c to b; bubble; raises interest rates; point b to c
• D) point d to c; recession; lowers interest rates; point c to b
• E) point b to a; bubble; raises interest rates; point a to d

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, typically in the form of cash or stock.

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including both public investors and restricted company insiders.

Cost of Equity

The return that investors expect for investing in a company's equity, considering the risk involved in holding the company's shares.

Present Value

The current value of a future sum of money or stream of cash flows, given a specified rate of return.