The Following Is Budget Information for a Hypothetical Economy

question 55

Multiple Choice

The following is budget information for a hypothetical economy. All data are in billions of dollars. Refer to the above table. The budget deficit was $75 billion in:

• A) Year 2
• B) Year 3
• C) Year 4
• D) Year 5

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Definitions:

Net Present Value Method

A method of analysis of proposed capital investments that subtracts the amount to be invested from the present value of the cash flows expected from the investments.

Cash Payback Method

A capital budgeting technique that calculates the time required to recoup the cost of an investment based on its expected cash flows.

Capital Investment

Funding provided to a business entity to purchase physical assets, like equipment or buildings, or to use in operations to stimulate growth.

Present Value Method

A financial calculation that determines the current worth of a future stream of cash flows, discounted at a specific rate.