Use the Following to Answer Questions

question 50

Multiple Choice

Use the following to answer questions:
-(Figure: AD-AS) Refer to Figure: AD-AS. Consider an economy that is producing an output level of Y₁. The economy has a(n) _____ gap, which can be closed by _____ fiscal policy.

• A) recessionary; expansionary
• B) inflationary; contractionary
• C) inflationary; expansionary
• D) recessionary; contractionary

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Definitions:

Corporate Subsidiary

A company that is completely or majority-owned by another company, known as the parent company.

New Equity Financing

The process of raising capital through the sale of shares in a company to new investors.

Leveraged Buyouts (LBOs)

Transaction in which a firm’s publicly owned stock is acquired in a mostly debt-financed tender offer, and a privately owned, highly leveraged firm results. Often, the firm’s own management initiates the LBO.

Private Equity Groups

Firms that invest in private companies, often acquiring significant or controlling stakes, with the intention of improving performance and increasing value before eventually selling the investment for a profit.