What happens to the present value of $1 one year from now if the market rate of interest falls? Explain

What will be an ideal response?


If the interest rate falls, the present value of $1 one year from now will increase. If the interest rate is lower, the amount you would have to set aside today to end up with $1 one year from now would be higher.

Economics

You might also like to view...

The traditional Keynesian approach to fiscal policy assumes

A) exchange rates are fixed. B) the focus of attention should be the long run. C) prices are flexible while interest rates are not. D) current taxes are the only taxes taken into account by firms and consumers.

Economics

Corporate profits are taxed by state and local governments, but not by the federal government

Indicate whether the statement is true or false

Economics

If autonomous spending decreases, then

A) the expenditure multiplier means that equilibrium expenditure increases by a larger amount. B) the expenditure multiplier means that equilibrium expenditure increases by a smaller amount. C) equilibrium expenditure does not change. D) the expenditure multiplier means that equilibrium expenditure decreases by a larger amount. E) equilibrium expenditure decreases by the same amount.

Economics

Refer to Table 15-1. When producing the profit-maximizing output, what is the amount of the firm's profit?

A) $335 B) $350 C) $880 D) $910

Economics