If You Put $400 into a Bank Account Today and It

question 280

Multiple Choice

If you put $400 into a bank account today and it promises to pay 5% interest for 6 years, how much is in the account at the end of the six years?

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Definitions:

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute a cheaper good for a more expensive one.

Income Effect

The alteration in a person's or an economy's earnings and the effect this alteration has on the demand for a product or service.

Price Change

An alteration in the cost of goods or services, which can go up or down, depending on various factors.

Diamond/Water Paradox

An observation in economics illustrating how water, which is essential to life, is cheap, while diamonds, which do not sustain life, are expensive.