The Real Interest Rate Is 1

question 27

Multiple Choice

The real interest rate is 1.8% per annum, and the inflation rate is 3% a year. What is the present value of a nominal payment of $5,000 next year? Round your answer to the nearest $10.

• A)$4,910
• B)$4,550
• C)$4,770
• D)none of the above

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Definitions:

Capital

Refers to financial resources, machinery, and buildings used for producing goods and services.

Trade-Offs

Decisions made that involve choosing between benefits and drawbacks of different options, reflecting the concept of opportunity cost.

Resources

are assets, materials, or substances that are valuable for their utility in producing goods, providing services, or supporting life.

Esther Duflo

A French-American economist known for her research in development economics and for being the youngest person and the second woman to receive the Nobel Prize in Economic Sciences.