Spending Programs That Substantially Alter the Composition of Aggregate Demand

question 84

Multiple Choice

Spending programs that substantially alter the composition of aggregate demand will tend to

• A) decrease the rate of unemployment.
• B) increase the rate of unemployment.
• C) promote a more rapid recovery.
• D) reduce structural unemployment.

---

Definitions:

NPV

Net Present Value; a calculation used to determine the value of an investment by subtracting the present values of cash outflows (including initial cost) from the present values of cash inflows over a period of time.

IRR

Internal Rate of Return; the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new plant, worthwhile.

Capital Rationing

In capital budgeting, the process of allocating available capital among projects to maximize total NPV.