John Won a Lottery That Will Pay Him €200,000 at the End

question 109

Multiple Choice

John won a lottery that will pay him €200,000 at the end of each of the next twenty years. Assuming an appropriate interest rate is 8% compounded annually, what is the present value of this amount?

• A) €2,120,720
• B) €42,910
• C) €1,963,630
• D) €9,152,392

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Definitions:

Recessionary Gap

The difference between the actual output of an economy and its potential output at full employment, indicating underutilization of resources.

Inflationary Expectations

The anticipation of future inflation rates, influencing economic decisions and behavior.

Discretionary Policy

Economic policies based on ad hoc decisions by the government or monetary authorities to influence the economy, such as changes in spending or taxation.

Inflationary Expectations

The anticipation by consumers and businesses of future inflation, which can influence economic behavior such as spending, saving, and investment.