A Cyclical Deficit Occurs When

question 4

Multiple Choice

A cyclical deficit occurs when

• A)there is a deficit due to the fact real GDP is less than potential GDP.
• B)government outlays are greater than revenues.
• C)there is a deficit due to the fact real GDP is greater than potential GDP.
• D)there is a deficit even when real GDP equals potential GDP.
• E)government outlays are less than revenues.

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Definitions:

Unlevered Cost of Capital

The cost of capital for a company without any debt, reflecting the required return on equity investments in a firm without leverage.

All Equity Firm

A company that finances its operations without any debt, using only its own equity.

Capital Structure

The mix of different forms of external funds used to finance a company's total capital, including debt and equity.

Coupon Rate

The annual yield paid on a bond, indicated as a percentage of its principal amount.