Empirical Evidence Finds That the Average Propensity to Consume Is

question 70

Multiple Choice

Empirical evidence finds that the average propensity to consume is constant:

• A) for only the short-run consumption function.
• B) for only the long-run consumption function.
• C) for both the short-run and the long-run consumption functions.
• D) for neither the short-run nor the long-run consumption functions.

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Definitions:

Accounting Rate of Return

A financial metric used to measure the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity, presented in a structured way.

NPV

Net Present Value (NPV) is a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Cost of Capital

Cost of capital represents the return rate an entity must pay to its stakeholders in order to justify the use of capital in the business.