Suppose That at a Particular Level of Real GDP, the Unintended

question 33

Multiple Choice

Suppose that at a particular level of real GDP, the unintended change in inventories is zero.How will this affect the level of real GDP?  

• A) The level of real GDP will be less than the equilibrium level of real GDP demanded. 
• B) The level of real GDP will be greater than the equilibrium level of real GDP demanded. 
• C) The level of real GDP will be the equilibrium level of real GDP demanded. 
• D) The level of real GDP will first be greater, and then less, than the equilibrium level of real GDP.

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Definitions:

NPV Profile Graph

A graphical representation showing the relationship between a project's Net Present Value (NPV) and various discount rates.

Cost of Capital

The minimum return that a company must earn on its investments to maintain its market value and satisfy its creditors and investors.

Firm's Value

The total worth of a company, determined by its financing structures, including equity and debt, and the present value of its expected future cash flows.

IRR Method

A financial analysis technique used to evaluate the desirability of investments or projects based on their internal rate of return, aiming to identify the profitability and potential return.