Actual Investment Is $62 Billion at an Equilibrium Output Level

question 14

Multiple Choice

Actual investment is $62 billion at an equilibrium output level of $620 billion in a private closed economy.The average propensity to save at this level of output:

• A)is 0.10.
• B)is 10.
• C)is 0.62.
• D)cannot be determined on the basis of the information given.

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Definitions:

Annual Coupon

The annual percentage rate of interest a bond pays, based on its face value.

Debt-Equity Ratio

A financial proportion indicating the use of debt versus equity in the capital structure for asset financing.

Cost of Equity

The return that investors require or expect to earn on their investment in a company's equity to compensate for the risk they undertake.

After-Tax Cost

The after-tax cost is the net cost of a transaction, investment, or other financial activity after taking into account the effect of taxes.