-Refer to the Graph Above to Answer This Question

question 107

Multiple Choice

-Refer to the graph above to answer this question.If this economy is experiencing a recessionary gap,which of the following could be correct?

• A)Real GDP is Y₁ and there is a budget deficit.
• B)Real GDP is Y₁ and there is a budget surplus.
• C)Real GDP is Y₂ and there is a balanced budget.
• D)Real GDP is Y₁ and there is a balanced budget.

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Definitions:

WACC

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, used to evaluate investment opportunities.

Flotation Costs

Flotation costs are the total costs incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees.

Net Present Value

A calculation that discounts future cash flows back to their present value to evaluate and compare the profitability of investments or projects.