In the Basic AD/AS Macro Model,permanent Increases in Real GDP

question 130

Multiple Choice

In the basic AD/AS macro model,permanent increases in real GDP are possible only if

• A)potential output is increasing.
• B)the correct fiscal policy is implemented.
• C)the economy's automatic stabilizers are allowed to operate.
• D)the aggregate supply curve is vertical.
• E)aggregate demand responds positively to demand shocks.

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Definitions:

Capital Rationing

The process of selecting profitable projects under the constraint of limited available investment funds.

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, calculated as the discount rate that makes the net present value of all cash flows from the investment equal to zero.

Hurdle Rate

Hurdle Rate is the minimum acceptable return on investment or project that a business requires before it considers it viable or proceeds with it.

Accounting Rate of Return

The return on an investment calculated by dividing the average annual profit by the initial investment cost, typically used to assess the profitability of potential investments.