An Investment Today of $25,000 Promises to Return $10,000 Annually

question 9

Multiple Choice

An investment today of $25,000 promises to return $10,000 annually for the next 3 years.What is the real rate of return on this investment if inflation averages 6% annually during the period?

• A) 3.49%
• B) 9.78%
• C) 4.84%
• D) 6.38%

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Definitions:

Unregulated Market

A market where the government does not impose price controls, quotas, or other restrictions on the forces of supply and demand.

Deadweight Loss

The diminished economic effectiveness arising from a failure to achieve or the inability to achieve equilibrium for a product or service.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service, intended to protect consumers.

Producer Surplus

Producer surplus is the difference between what producers are willing to accept for a good versus what they actually receive, typically due to market price.