During an Economic Expansion Due to an Increase in Technology

question 18

Multiple Choice

During an economic expansion due to an increase in technology, A, consumption will:

• A)tend to rise due to the income effect.
• B)be unchanged.
• C)tend to rise due to the intertemporal substitution effect of the interest rate rising.
• D)tend to fluctuate.

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Definitions:

Equivalent Annual Cost

A financial analysis tool used to compare the cost effectiveness of two or more alternative investments, taking into account both the initial investment and the annual operating costs.

Discounted Payback

A capital budgeting method that calculates the time required to break even on an investment based on the discounted cash flows.

Profitability Index

A financial tool used to assess the desirability of an investment by dividing the present value of future cash flows by the initial investment cost.

Economic Lives

The duration over which an asset is expected to be useful in generating revenue or other economic benefits.