In a Binding Situation

question 184

Multiple Choice

In a binding situation,

• A) planned investment increases when the price level decreases.
• B) output increases when the price level decreases.
• C) planned investment and output both increase when the price level decreases.
• D) neither planned investment nor output change when the price level decreases.

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Definitions:

Marginal Tax Rate

The amount of tax paid on an additional dollar of income.

Bond Yield

The return an investor realizes on a bond, calculated by dividing the annual interest payments by the current market price of the bond.

Equally Weighted Index

An equally weighted index is a stock market index in which each constituent stock contributes equally to the index's value, regardless of the company's market capitalization.

Value-Weighted Index

A stock market index in which each component is weighted in proportion to its market value.