If the Economy Is on the Flat Portion of the AS Curve

question 98

Multiple Choice

If the economy is on the flat portion of the AS curve,

• A) there is little crowding out of planned investment.
• B) there is almost complete crowding out of planned investment.
• C) consumption, but not government spending, crowds out planned investment.
• D) government spending, but not consumption, crowds out planned investment.

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Definitions:

Internal Rate

Refers to the calculation used to estimate the profitability of potential investments, specifically the internal rate of return (IRR) on a project.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used for analyzing the profitability of investments or projects.

Discount Rate

The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.

Simple Rate

An interest calculation method where the interest charge is calculated only on the principal amount, without compounding.