The Interest Rate Is 10% and Is Expected to Stay

question 27

Multiple Choice

The interest rate is 10% and is expected to stay constant at that level forever.The present discounted value of $50,000 a year forever starting today is

• A)$500,000.
• B)$550,000.
• C)$ infinity.
• D)$1 million.
• E)$45,454.45.

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Definitions:

Investment Spending

Expenditures on capital goods that will be used for future production.

Aggregate-Demand Curve

A graphical representation that shows the total amount of goods and services demanded across all levels of the economy at different price levels.

Investment Spending

Expenditures on capital goods by firms and governments that are intended to increase productive capacity in the future.

Economic Uncertainty

Economic uncertainty involves unpredictable changes in the economic environment that can affect decision making, investments, and economic outcomes.