In Order to Explain How Societies Deal with the Problem

question 27

Multiple Choice

In order to explain how societies deal with the problem of scarcity,economists apply simplified representations known as

• A) simplifying assumptions.
• B) empirical tests.
• C) normative questions.
• D) models.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, given a specific rate of return.

Present Value

The present value of a future amount of money or series of cash flows, considering a certain rate of return.

Annuity

A monetary product that ensures a regular payment schedule to its holder, frequently used to secure a livelihood for people in their post-working years.

Compounding

The process whereby interest is credited to an existing principal amount as well as to interest already paid, causing the investment to grow at an accelerating rate.