In the Long Run,most Economists Agree That a Permanent Increase

question 30

Multiple Choice

In the long run,most economists agree that a permanent increase in government spending leads to

• A)no decrease in private spending.
• B)a decrease in private spending by less than the amount that government spending increased.
• C)a decrease in private spending by the same amount that government spending increased.
• D)a decrease in private spending by more than the amount that government spending increased.

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Definitions:

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but is kept by the company for reinvestment in its core business or to pay debt.

Internal Growth Rate

The internal growth rate is the maximum rate at which a company can expand its operations through reinvestment of its own earnings, without raising external financing.

Dividend Payout Ratio

The percentage of a company's net earnings distributed to its shareholders as dividends.

Fixed Assets

Long-term tangible assets used in the operation of a business that are not expected to be consumed or converted into cash within a year.