Given That $$\begin{array} { l } G = 50 \\I = 40 \\C = 0.75 Y _ { d } + 45 \\T = 0.2 Y + 80\end{array}$$

question 6

Multiple Choice

Given that $$\begin{array} { l } G = 50 \\I = 40 \\C = 0.75 Y _ { d } + 45 \\T = 0.2 Y + 80\end{array}$$ calculate the equilibrium level of national income.

• A)175
• B)187.5
• C)125
• D)487.5
• E)75

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Definitions:

Required Return

The smallest annual percent yield necessary to convince people or corporations to allocate funds towards a certain security or project.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to determine the rate of return a company must earn on its existing assets to satisfy its creditors, owners, and other providers of capital.

Low Risk Projects

Investments or projects that are considered to have a lower probability of resulting in a financial loss.

Investor Risk Aversion

The tendency of investors to prefer lower-risk investments to avoid potential losses.