The NPV Value Obtained by Discounting Nominal Cash Flows Using

question 48

Multiple Choice

The NPV value obtained by discounting nominal cash flows using the nominal discount rate is the same as the NPV value obtained by discounting

• A)real cash flows using the real discount rate only.
• B)real cash flows using the nominal discount rate only.
• C)nominal cash flows using the real discount rate only.
• D)real cash flows using the nominal discount rate and nominal cash flows using the real discount rate.

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Definitions:

Law of Supply

The economic principle stating that as the price of a good increases, the quantity supplied of the good also increases, ceteris paribus.

Law of Demand

An economic principle stating that as the price of a good or service decreases, the quantity demanded increases, and vice versa, holding other factors constant.

Effective Price Floor

A government-imposed limit below which prices cannot legally fall, set above the equilibrium price, leading to potential surplus or excess supply.

Industry Firms

Companies or businesses that operate within a specific sector of the economy, producing goods or services related to that sector.