You Are Scheduled to Receive $10,000 in One Year

question 1

Multiple Choice

You are scheduled to receive $10,000 in one year. An increase in the interest rate will have what effect on the present value of this cash flow?

• A) It will cause the present value to rise.
• B) It will have no effect on the present value.
• C) It will cause the present value to fall.
• D) The effect cannot be determined with the information provided.

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Definitions:

PQ Remains Same

A situation in economic terms where the price level (P) and quantity (Q) of goods and services in the market stay unchanged over a period.

Velocity V

Velocity V typically refers to the velocity of money, a measurement of the rate at which money is exchanged in an economy.

Percentage Fall

A measure that indicates the decrease in a value or quantity, expressed as a percentage of its previous value.

Full Employment

A situation in which all available labor resources are being used in the most economically efficient way.