Because of the Spending multiplier effect, small investment changes will create larger changes, and macroeconomic policy will undergo some improvements and expenditures
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Answer:
b. In the first economy, the spending multiplier is greater than in the second economy. In the third economy, the spending multiplier is undefined
Explanation:
This can be easily understood by going through some calculations in a spending multiplier formula.
WORKINGS
The formula for Spending Multiplier = 
Spending Multiplier
Economy 1: Multiplier = 
= 2
Economy 2: Multiplier = 
= 1
Economy 3: Multiplier = 
= undefined
Note: MPS can be abbreviated as Marginal propensity to save
As we can see here economy 1 is 50% greater than economy 2 and economy 3 is undefined because they spend whole dollar they earn additionally.
On behalf of the above calculations, option B is a perfect match!
Answer: a. Allow management to conserve cash, give stockholders more shares, and cause no change in total assets, liabilities, or stockholders' equity.
Explanation:
Stock Splits increase the number of shares a company without actually changing their market capitalization by simply dividing the shares available.
There are a bunch of reasons to do this but one of them is to conserve cash. By splitting stock, managers can conserve cash by not paying dividends but still proving that the company can still pay dividends. The Shareholders getting MORE stock would be the reward.
Since Stock splits don't change the Market Capitalization, they don't have an effect on Equity either and by extension Assets and Liabilities.
