Refer to the Diagram, Where T Is Tax Revenues and G

question 146

Multiple Choice

Refer to the diagram, where T is tax revenues and G is government expenditures. All figures are in billions of dollars. If the full-employment GDP and actual GDP are each $400 billion, this economy will
Realize a

• A) cyclically adjusted deficit of $20 billion.
• B) cyclical deficit of $20 billion.
• C) cyclical surplus of $20 billion.
• D) cyclically adjusted deficit of zero.

---

Definitions:

Target Capital Structure

Target capital structure is the proportional combination of debt, equity, and other financing sources a company aims to maintain.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows.

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk compared to the risk-free rate of return.

Beta

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio compared to the market as a whole.