Table 12.5 -Refer to Table 12.5.Consider the Hypothetical Information in the Table

question 189

Multiple Choice

Table 12.5
-Refer to Table 12.5.Consider the hypothetical information in the table above for potential real GDP, real GDP, and the price level in 2017 and in 2018 if the federal government does not use fiscal policy.If the federal government uses fiscal policy successfully to keep real GDP at its potential level in 2018, which of the following will be lower than if the federal government had taken no action?

• A)real GDP and the unemployment rate
• B)real GDP and the inflation rate
• C)real GDP and potential GDP
• D)potential GDP and the inflation rate
• E)interest rates and the participation rate

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Definitions:

Junk Bonds

Risky bonds issued by financially weak companies that pay high rates of interest. Also called high yield bonds.

Corporate Raiders

Investors who buy a large stake in a corporation with the goal to gain control and make changes to increase its value and their profit.

Hostile Takeovers

Hostile takeovers occur when a company acquires another company against the wishes of the target company's management and board of directors.

WACC

Weighted Average Cost of Capital, or WACC, is a financial metric that calculates the cost of capital for a business, weighting each capital segment according to its relative proportion.