Assuming a Positive Interest Rate, the Present Value of Money

question 2

Multiple Choice

Assuming a positive interest rate, the present value of money suggests:

• A) $1 today = $1 in one year.
• B) $1 today > $1 in one year.
• C) $1 today < $1 in one year.
• D) $1 today ≤ $1 in one year.
• E) None of the choices are correct.

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Definitions:

Long-run Equilibrium

A state in which economic forces such as supply and demand are balanced and in the context of production, firms are operating at an efficient scale.

Decreasing-cost Industry

An industry in which production costs fall as the industry expands, often due to economies of scale or technological improvements.

Long-run Equilibrium Prices

The price at which the quantity supplied equals the quantity demanded, stabilized over a longer period, factoring in all market adjustments and resource mobility.

Demand Leads

A situation where increases in demand for goods and services drive economic growth and expansion.