Considering Only Its Direct Effect on Income, Expansionary Fiscal Policy

question 80

Multiple Choice

Considering only its direct effect on income, expansionary fiscal policy tends to:

• A)increase income and imports, shifting the U.S. trade balance in the direction of a deficit.
• B)increase income and imports, shifting the U.S. trade balance in the direction of a surplus.
• C)decrease income and imports, shifting the U.S. trade balance in the direction of a deficit.
• D)decrease income and imports, shifting the U.S. trade balance in the direction of a surplus.

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Definitions:

NPV Profile Graph

A graphical representation showing the relationship between a project's Net Present Value (NPV) and various discount rates.

Cost of Capital

The minimum return that a company must earn on its investments to maintain its market value and satisfy its creditors and investors.

Firm's Value

The total worth of a company, determined by its financing structures, including equity and debt, and the present value of its expected future cash flows.

IRR Method

A financial analysis technique used to evaluate the desirability of investments or projects based on their internal rate of return, aiming to identify the profitability and potential return.