A star basketball player signs a contract that newspaper reports say is worth $20 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth
A) $20 million as reported in the papers.
B) less than $20 million since the present value of $5 million received one or more years from now is less than $5 million.
C) more than $20 million because the present value of $5 million received one or more years from now is more than $5 million.
D) either more or less than $20 million, depending on the value of the discount rate.
B
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Refer to Figure 13-4. Given the economy is at point A in year 1, what will happen to the unemployment rate in year 2?
A) It will remain constant. B) It will rise. C) It will fall. D) not enough information to answer the question
A large open economy's real interest rate will decrease if
A) the expected future marginal product of domestic capital rises. B) the expected future marginal product of foreign capital rises. C) there is a temporary positive domestic supply shock. D) there is a temporary negative domestic supply shock.