Suppose That in Year 2 There Was a Lower Federal

question 43

Multiple Choice

Suppose that in Year 2 there was a lower federal budget deficit than in Year 1. This could be explained by _ in Year 2.

• A)a higher stock of government debt
• B)higher government expenditures (with constant real GDP)
• C)an upward shift of the budget deficit function
• D)higher real GDP (with constant fiscal policy)
• E)lower real GDP (with constant fiscal policy)

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Definitions:

Bonds Outstanding

The total amount of bonds that have been issued by a corporation or government and have not yet been repaid.

Leveraged Value

Refers to the increased value a company aims to achieve by borrowing capital or using financial leverage to fund its operations or investments.

Weighted Average

A calculation that takes into account the varying degrees of importance or values of the components in the data set.

Cost of Debt

The effective rate that a company pays on its current debt, which can be measured before or after taxes.