Say's Law Will Prevent Recessions Only If a Critical Assumption

question 46

True/False

Say's law will prevent recessions only if a critical assumption of the classical model holds: That the interest rate adjusts until saving is equal to business and government borrowing.

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Definitions:

Net Present Value

A valuation method that calculates the present value of an investment's expected cash inflows and outflows, used to assess its profitability.

Initial Cash Outlay

This refers to the amount of money initially invested or spent to start a project or investment.

Market Value

The current price at which assets, securities, or a company can be bought or sold on the open market, reflecting the perceived value by investors.

Flotation Costs

The costs incurred by a company when issuing new securities, including fees such as underwriting fees, legal fees, and registration fees.