A sum of money received at a future date is worth less than the same sum of money received today. Why? Explain this with an example.
What will be an ideal response?
A dollar obtainable sooner is worth more than a dollar obtainable later because of the interest that can be earned on that dollar in the interim. A person with $100 in his or her hand, if the annual rate of interest were 10 percent, could lend it out and receive $110 in a year’s time. For this reason, money received today is worth more than the same number of dollars received later.
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If total output increases from $1 trillion to $2 trillion as population increases from 100 million to 200 million, then output per person:
A. remains constant. B. doubles. C. decreases D. increases, but by less than 100 percent.
To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
If we were the only two people in the world and I like bananas while you hate them, efficiency demands that I get all bananas.
Answer the following statement true (T) or false (F)
Depreciation allowance ________ the taxes a firm must pay and ________ the net present value of an investment.
A) increases; increases B) increases; decreases C) decreases; decreases D) decreases; increases