The Present Discounted Value of a Future Payment Becomes Smaller

question 8

Multiple Choice

The present discounted value of a future payment becomes smaller when

• A)the nominal interest rate decreases.
• B)the payment is made sooner rather than later.
• C)the payment itself decreases.
• D)all of the above
• E) none of the above

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Definitions:

Money Expansion

The increase in the total quantity of money in circulation within an economy, often achieved through central banking policies.

Fed Officials

Members of the Federal Reserve, the central banking system of the United States, who are responsible for monetary policy decisions.

Rational Expectations Theory

A hypothesis proposing that individuals form forecasts about the future based on all available information in an unbiased and consistent manner.

Aggregate Output

Aggregate Output is the total value of all goods and services produced in an economy over a given period of time.