The Notion of Compound Interest Means That

question 39

Multiple Choice

The notion of compound interest means that:

• A) if you leave a lump sum (some dollar amount) in the bank for some period, it will only accumulate interest on the principal (the original amount you deposited).
• B) if you leave a lump sum (some dollar amount) in the bank for some period, it will accumulate interest both on the principal and on any accumulated interest.
• C) any amount you borrow will accumulate more and more interest, no matter how much you pay back.
• D) the demand for loanable funds is upward-sloping.
• E) your interest will grow, but never at a rate higher than 13%.

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Definitions:

Deductions And Exemptions

Specific amounts that taxpayers can subtract from their gross income to reduce taxable income, potentially lowering their tax liability.

Federal Income Taxes

Taxes levied by the U.S. federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Adam Smith

An 18th-century Scottish economist and philosopher known as the "father of economics" and author of "The Wealth of Nations," which advocates for the free market and the division of labor.

Government's Role

The duties and activities undertaken by a government to regulate and guide the economy, society, and national defense.