The Present Value and the Interest Rate Have

question 98

Multiple Choice

The present value and the interest rate have:

• A) a direct relationship; as i increases, pv increases.
• B) an inverse relationship; as i increases, pv decreases.
• C) an unclear relationship; whether it is direct or inverse depends on the interest rate.
• D) no relationship.

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Definitions:

Inflation

An economic condition characterized by a general increase in prices and fall in the purchasing value of money.

Utility Function

A mathematical representation of how different bundles of goods or services rank according to their utility (satisfaction) for an individual or entity.

Consumption

The use of goods and services by households or individuals, typically measured in economic studies to assess economic activity or well-being.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can afford with a given budget at prevailing prices.