An Economy That Experiences Two or More Consecutive Quarters of Decreases

question 27

Multiple Choice

An economy that experiences two or more consecutive quarters of decreases in real GDP is experiencing a(n)

• A) positive output gap.
• B) a negative output gap.
• C) trough.
• D) recession.
• E) deflationary gap.

---

Definitions:

Cash Flows

The complete sum of financial resources being exchanged within a business, profoundly impacting its immediate financial health.

Component Cost Of Debt

The effective rate that a company pays on its current debt, incorporating both interest rates and other costs associated with borrowing.

Component Cost Of Equity

The rate of return that a company must offer investors to encourage investment in its equity, accounting for risk.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project by discounting future cash flows to their present value.