Since People Respond to Incentives, We Would Expect That, If

question 5

Multiple Choice

Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%, then

• A)fewer students will take degree courses in accounting and more will take education courses.
• B)fewer students will take degree courses in education and more will take accounting courses.
• C)fewer students will attend university.
• D)None of these answers.

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Definitions:

Present Value Factor

A factor used to calculate the present value of a future amount of money or stream of payments, based on a specific rate of return.

Discount Factor

A multiplicative factor used to calculate the present value of future cash flows or income streams, reflecting the time value of money.

Time Value

The viewpoint that money on hand today is considered more valuable than the same amount received in the future, due to potential earnings.

Money

A medium of exchange that facilitates trade, acting as a unit of account, a store of value, and sometimes, a standard of deferred payment.