You sign a contract to pay $1000 next year for the refrigerator you bought today. The rate of inflation is 10% and the real interest rate is 7%. Alternatively, you could pay $875 today. What should you do to save the most money?
What will be an ideal response?
1000/[(1 + .1 ) ? (1 + .07 )] = $849.60. This is the real present value of the $1000 payment next year. Thus, you should pay next year and not today in order to save the most money.
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A currency appreciation is disinflationary and contractionary if the
A. inward shift of the aggregate demand curve due to the fall in exports exceeds the outward shift of the aggregate supply curve due to lower input prices. B. outward shift of the aggregate demand curve due to the rise in exports exceeds the outward shift of the aggregate supply curve due to lower input prices. C. outward shift of the aggregate demand curve due to the fall in exports exceeds the inward shift of the aggregate supply curve due to higher input prices. D. inward shift of the aggregate demand curve due to lower input prices exceeds the outward shift of the aggregate supply curve due to the rise in exports.
A price index can be computed by
A) dividing a nominal variable by its real counterpart. B) dividing a real variable by its real counterpart. C) subtracting the nominal variable from its real counterpart. D) subtracting the real variable from its nominal counterpart.
A demand curve usually has a
a. negative slope because price and quantity demanded are inversely related b. negative slope because as price rises, demand falls c. positive slope because price and quantity demanded are positively related d. positive slope because price and quantity demanded are inversely related e. slope of zero because there is no change along a demand curve when everything else is held constant
Equilibrium wage will increase if quantity of labor demanded rises
Indicate whether the statement is true or false