As the Winning Contestant in a Television Game Show, You

question 49

Multiple Choice

As the winning contestant in a television game show, you are considering the prizes to be awarded.You must indicate to the sponsor which of the following two choices you prefer, assuming you want to maximize your wealth.Assume it is now January 1, and there is no danger whatever that the sponsor won't pay off. Which one would you choose?

• A) Choice 1
• B) Choice 2
• C) Choice 1, if the payments were made at the end of the year.
• D) The choice would depend on how soon you need the money.
• E) Either one, since they have the same present value.

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Definitions:

Aggregate Demand

The collective appetite for goods and services in an economy, valued at a certain price point during a precise time interval.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced in a country in a given time period.

Price Level

A measure that reflects the average of current prices across the entire spectrum of goods and services produced in the economy.

Aggregate Supply Curve

Represents the total quantity of goods and services that producers in an economy are willing and able to supply at a given overall price level in a given period.