Given Full-Employment Output = $2,800, Equilibrium Real GDP = $2,500

question 104

Multiple Choice

Given full-employment output = $2,800, equilibrium real GDP = $2,500, and MPS = 0.25, which of the following changes would most likely bring the economy to a full-employment level of real GDP?

• A) $300 decrease in taxes.
• B) $75 increase in government spending.
• C) $75 decrease in taxes.
• D) $300 increase in government spending.
• E) $75 decrease in government spending.

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Definitions:

Cost of Equity

Cost of equity refers to the return a company must offer investors to compensate for the risk they take by investing in the company's equity.

New Stock

Shares that are issued to the public for the first time through an initial public offering or as additional shares by a company.

Component Cost

Component cost refers to the cost associated with each separate element or 'component' in the process of calculating a company's Weighted Average Cost of Capital (WACC).

Debt Issue

The act of a company raising money through the sale of bonds or other fixed-income securities.