Suppose That Nominal National Income in Some Country Fell from $100

question 28

Multiple Choice

Suppose that nominal national income in some country fell from $100 billion to $95 billion during the year. Over the same period, inflation was 5 percent. Therefore the real national income in this country

• A)fell by 10 percent.
• B)fell by 5 percent.
• C)was unaffected.
• D)rose by 5 percent.
• E)rose by 10 percent.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

NPVGO

Net Present Value of Growth Opportunities, a measure assessing the value of future investment opportunities of a company.

Growth Opportunities

Prospects or chances a company has to expand its operations, increase sales, and achieve higher profits.

Risk-Adjusted

A process of modifying financial projections or valuations to account for the uncertainty and potential risk involved.