Scenario 8-2

question 410

Multiple Choice

Scenario 8-2. Assume the following information for an imaginary, closed economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
-Refer to Scenario 8-2. For this economy, private saving is equal to

• A) $40,000.
• B) $50,000.
• C) $55,000.
• D) $60,000.

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Definitions:

Straight-Line Method

A method of allocating the cost of a tangible asset over its useful life in equal annual installments.

Net Present Value

A method used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period.

Discount Rate

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

Payback Period

The period needed to recoup the expenses of an investment.