Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:
Prize 1: $150,000 to be received right away, with three additional payments of $150,000 to be received each year for the next three years.
Prize 2: $500,000 to be received right away.
If the interest rate is 5 percent, what is the present value of each prize?
Prize 1: Present value = $150,000 + [$150,000 / (1 + 0.05 )] + [$150,000 / (1 + 0.05 )2] + [$150,000 / (1 + 0.05 )3] = $558,487.20
Prize 2: Present value = $500,000
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Decreases in interest rates have made it less costly to finance purchases of new houses. What impact will this have on U.S. aggregate demand?
A) None. A nation's aggregate demand is not affected by changes in interest rates. B) U.S. aggregate demand will remain unchanged. C) U.S. aggregate demand will decrease. D) The U.S. aggregate demand curve will shift to the right.
The positive slope of the AS curve is a _____ phenomena, when the _____ are held constant
a. long-run; business profits b. short-run; government expenditures c. short-run; costs of production d. long-run; commodity prices e. long-run; aggregate expenditures