You Sign a Contract to Pay $1000 Next Year for the Refrigerator

question 44

Essay

You sign a contract to pay $1000 next year for the refrigerator you bought today.The rate of inflation is 10% and the real interest rate is 7%.Alternatively,you could pay $875 today.What should you do to save the most money?

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Definitions:

Conditioned Response

A learned response to a previously neutral stimulus that has become associated with an unconditioned stimulus through conditioning.

Classical Conditioning

A learning process where an originally neutral stimulus becomes associated with a particular response through conditioning.

Conditioned Stimulus

In classical conditioning, this is a previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response.

Closet Door

A movable barrier used for closing off the entrance to a closet, often regarded symbolically in phrases denoting privacy or secrecy.