Assuming a Positive Interest Rate, the Present Value of Money

question 62

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:

Demand Deposits

Bank accounts from which money can be withdrawn at any time without any advance notice.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits, and other liquid assets quickly convertible to cash.

M2

A measure of the money supply that includes cash, checking deposits, and easily convertible near money such as savings deposits, money market securities.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.