The interest rate is 5 percent. How does $500 to be received a year from today compare in value to $500 right now?
What will be an ideal response?
With an interest rate of 5 percent, $500 deposited in the bank right now will be worth $525 one year from today. (To calculate this amount, the future value is $500(1 + r) = $500(1 + .05 ) = $525.) The $500 received one year from today, however, has a present value of $500/(1 + r) = $500/(1 + .05 ) = $476.19. So, $500 today is worth more than $500 a year from now.
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The inflation that occurred during the Civil War (1861–1865) can be described as all of the following except
(a) A means of expropriating resources to fight the war (b) A form of taxation to provide resources to fight the war (c) A representation of a decrease in the purchasing power of money (d) A less expensive way of paying for the war than taxation
In accordance with the law of supply, both individual and market supply curves are drawn:
a. horizontal. b. vertical. c. downward-sloping. d. upward-sloping.
When the market basket is tracked over time the goods within the basket:
A. remain the same, so only changing prices are captured. B. reflect the typical consumer each year, so it captures how consumers are affected each year. C. reflect the typical consumer each year, but prices are held constant, so it captures if we are consuming more or less as an economy. D. remain the same, but some prices are held constant on items that are important to consumers.
When the price of an eBook is $15.00, the quantity demanded is 400 eBooks per day. When the price falls to $10.00, the quantity demanded increases to 700 . Given this information and using the midpoint method, we know that the demand for eBooks is
a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic.