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Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.
-Refer to Financial Crisis.In the long run,if the Fed does not respond,the change in price expectations created by the crisis shifts
Interest Rate
The proportion, in a percentage, at which interest is paid by borrowers for the use of money that they borrow from a lender. It is a critical component of the credit markets.
Years
A unit of time equal to 365 days (or 366 days in a leap year), used in calendar timekeeping.
Present Value
The value right now of a sum of money expected in the future or a sequence of cash inflows, factoring in a specific rate of return.
Discount Rate
This is the rate of interest utilized in the process of discounted cash flow analysis to calculate the current value of future cash flows.
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