Using an interest rate of 5%, which figure has the smallest present value?
A. $5500 to be received ten years from now
B. $5075 to be received three years from now
C. $5000
D. $5050 to be received two years from now
Answer: A
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
When the anticipated rate of inflation is 5 percent and the real rate of interest is 4 percent, the nominal rate of interest is
A) 1 percent. B) 4 percent. C) 5 percent. D) 9 percent.
When a consumer experiences a price increase for an inferior good, if the income effect is
a. greater than the substitution effect, the demand curve will be downward sloping. b. greater than the substitution effect, the demand curve will be upward sloping. c. less than the substitution effect, the demand curve will be upward sloping. d. less than the substitution effect but the substitution effect is positive, the demand curve will be upward sloping.
What causes a direct increase in consumption spending
What will be an ideal response?