Assume That You Borrow $2,000 from Your Sister and That

question 3

Multiple Choice

Assume that you borrow $2,000 from your sister and that you will pay her back in one lump sum. She charges you 9 percent interest in year 1 and increases the rate by 1 percent per year until the loan is paid off. How much will you owe if you wait until year 3 to pay off the loan?

• A) $2,467.91
• B) $2,661.78
• C) $2,775.23
• D) $2,809.53

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Definitions:

Neoclassical Economics

An economic methodology that explores how market distributions of commodities, outputs, and incomes are regulated by supply and demand dynamics.

Behavioral Economics

An area in economics focused on examining the impact of psychological, social, cognitive, and emotional elements on the economic choices made by individuals and institutions.

Natural Disasters

Unpredictable and severe events caused by natural forces such as earthquakes, floods, hurricanes, and wildfires that can result in significant damage and loss of life.

Dictator Game

A game used in experimental economics to study decision-making, where one player (the "dictator") determines how to split an endowment between themselves and another player.