Is $1,000 received today worth as much as $1,000 received one year from now? Explain your answer
What will be an ideal response?
No, the timing of the payment is important in deciding its value today. If you receive $1,000 today you you could earn interest on the $1,000 for one year. For example, if the interest rate is 5% then $1,000 received today would be worth $1,000 x 1.05 = $1,050 in one year.
You might also like to view...
Which of the following statements is false?
A) Anytime you have to decide which action to take you are facing an economic trade-off. B) Every individual, no matter how rich or poor, is faced with making trade-offs. C) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale. D) Economics is a social science that studies the trade-offs we are forced to make because of scarcity.
If a central bank wants to counter the change in the price level caused by an adverse supply shock, it could change the money supply to shift
a. aggregate demand right. b. aggregate demand left. c. aggregate supply right. d. aggregate supply left.
You are the Minister of Trade for a small island country with the following annual PPC:
You are negotiating a trade agreement with a neighboring island with the following annual PPC:
If the other island's delegate offers to give you 2 fish for every 1 coconut you give them, you will:
A. accept their offer because you do not have the comparative advantage in fish. B. refuse their offer because the opportunity cost to you of a coconut is less than 2 fish. C. refuse their offer because the opportunity cost to you of a coconut is more than 2 fish. D. accept their offer because you do not have an absolute advantage in fish.
The income effect and the substitution effect associated with a wage increase influence workers in the same direction.
Answer the following statement true (T) or false (F)