One of the Basic Principles Behind the Present Value Model

question 31

Multiple Choice

One of the basic principles behind the present value model is:

• A) FV/PV = X
• B) an asset's price should exactly equal the total future value of all the asset's present payments
• C) the Security Market Line
• D) an asset's price should exactly equal the total future value of all the asset's future payments

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Definitions:

Fiscal Policies

Fiscal policies are government spending and tax policies used to influence economic conditions, including aggregate demand, employment, and inflation.

Cyclical Unemployment

Cyclical unemployment is the result of downturns in the business cycle, rising during economic recessions and declining in periods of economic growth.

Aggregate Demand

The total demand for all goods and services within an economy at a given overall price level and time.

Hyperinflation

Extremely high and typically accelerating inflation, drastically eroding the real value of the local currency.