Which of the Following Best Describes Business Cycle Activity

question 64

Multiple Choice

Which of the following best describes business cycle activity?

• A) Business cycles are recurring fluctuations in the level of economic activity.
• B) Each phase of the business cycle lasts a predictable length of time.
• C) The contraction phase of the business cycle generally lasts longer than the expansion phase.
• D) The trough of a business cycle generally lasts about three months.

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Definitions:

Traditional NPV

Net Present Value; a method of evaluating the profitability of an investment by calculating the present value of expected future cash flows minus the initial investment cost.

Beta

A measurement of the volatility of a stock or a portfolio in comparison to the market as a whole.

Discount Rate

The rate employed in discounted cash flow assessments to establish the current valuation of anticipated future cash flows.

Certainty Equivalent Approach

A method used in capital budgeting and investment theory that adjusts future cash flows to account for risk, making them equivalent in value to certain cash flows.