Over the Next 5 Years, You Are Expecting to Receive

question 51

Multiple Choice

Over the next 5 years, you are expecting to receive $500, $600, $600, $800, and $900 respectively. If you can invest this money at 7.5 percent per year over five years, how much will that money be worth at the end of that period?

• A) $2,693B) $4,337
• B) $3,400
• C) $3,000

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Definitions:

Rational Expectationists

Economists who believe that individuals make decisions based on their rational outlook, available information, and past experiences.

Monetary Policy

The process by which the monetary authority of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Say's Law

An economic principle that asserts that supply creates its own demand, meaning that production of goods and services creates an equal amount of demand for those goods and services.

Classical Economics

Laissez-faire economics. Our economy, if left free from government interference, tends toward full employment. The prevalent school of economics from about 1800 to 1930.