Why are interest rates considered to be the opportunity cost of investments?
Interest rates reflect peoples' preference for consumption goods that are available immediately (or sooner) over goods that are only available later. They also reflect the productivity of investment as savings are used to purchase capital goods that produce output over longer spans of time. Interest is an opportunity cost. Investments that produce income over the future must entail forgone consumption in the present.
You might also like to view...
The unemployment rate is the number of unemployed people
A) divided by the sum of the number of people who are working and the number of people who are looking for work. B) and the number of people working fewer than their desired number of hours, divided by the number of people who are working or looking for work. C) divided by the total working-age population. D) divided by the number of people who are working.
Refer to the scenario above. What is the optimal strategy of each bidder?
A) Each bidder should bid up to his/her maximum willingness to pay for the necklace. B) Each bidder should bid above his/her maximum willingness to pay for the necklace. C) Each bidder should bid up to 9/10 of his/her valuation of the necklace. D) Each bidder should bid up to 4/5 of his/her valuation of the necklace.
The cross-elasticity of labor with respect to capital is the
A. change in wages relative to a change in the price of capital. B. percent change in labor relative to a percent change in capital. C. percent change in wages relative to a percent change in the price of capital. D. percent change in labor relative to a percent change in the price of capital. E. change in labor relative to a change in capital.
The government inflates the demand for farm products
A. With price supports. B. Through marketing orders. C. Through acreage set-asides. D. By purchasing surplus crops.