Erin Has a Theory That the Largest Cause of Poverty

question 100

Multiple Choice

Erin has a theory that the largest cause of poverty is poor budgeting and financial planning.Her suggestion to provide budgeting and planning advice to the poor is similar to the reasoning behind

• A) the winner-take-all theory.
• B) in-kind transfers.
• C) efficiency wage theory.
• D) occupational crowding.
• E) compensating differentials.

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Definitions:

Present Value

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

Net Present Value Rule

A principle that states an investment should be made if the net present value of its cash flows, discounted at the hurdle rate, is positive.

Invest

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.