The Rise and Fall of Real GDP Over the Course

question 99

Multiple Choice

The rise and fall of real GDP over the course of the business cycle suggests that

• A) the economy is always at full employment.
• B) the economy may not always be in long-run equilibrium.
• C) the economy is always at its potential output level.
• D) wage and price stickiness ensures that the economy moves from a peak to a trough.

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Definitions:

Payback Period

The time it takes for an investment to generate enough cash flow to recover its initial cost, used in capital budgeting to evaluate investment efficiency.

Straight-Line Depreciation

A plan for breaking down the expense of a real asset across its viable life in steady annual segments.

Salvage Value

The anticipated earnings from an asset's sale following the cessation of its useful life.

Net Cash Flow

The variance between the cash entering and leaving a business over a given timeframe.