Which Is the Smallest If Interest Rates Are 8 Percent

question 3

Multiple Choice

Which is the smallest if interest rates are 8 percent?

• A) $100 to be received after five years
• B) the present value of an annuity of $100 for 5 years
• C) $100 received in the present
• D) $100 received for two years

---

Definitions:

Real Wages

Wages that have been adjusted for inflation, reflecting the purchasing power of the income.

Labor Supply Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor workers are willing to offer at that wage rate.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute one good for another that has become relatively cheaper.

Income Effect

Modifications in the earnings of individuals or the broader economy and their effects on the quantity of goods or services demanded.