In Our Simple Macro Model with Government,which Statement Correctly Describes

question 11

Multiple Choice

In our simple macro model with government,which statement correctly describes the following equation: YD = (0.75) Y?

• A)If disposable income increases by $0.75,then national income increases by $1.00 and total tax revenue rises by $0.75.
• B)Net tax revenue is equal to 75% of national income.
• C)If national income increases by $1.00,then disposable income increases by $0.75 and net tax revenue increases by $0.25.
• D)Net tax revenue is equal to 25% of disposable income.
• E)If national income increases by $1.00,then disposable income increases by $0.25 and net tax revenue increases by $0.75.

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Definitions:

Hurdle Rate

The minimum rate of return on an investment required by an investor or manager, used to assess its viability.

Cost Of Capital

The rate of return that a business must achieve to meet the expectations of its investors and creditors, representing the opportunity cost of investing capital in a specific business.

IRR

The Internal Rate of Return; a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Salvage Value

The foreseen market valuation of an asset at the lifespan’s end.