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Author Question: What happens to the present value of 1 one year from now if the market rate of interest falls? ... (Read 27 times)

Frost2351

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on: Jun 29, 2018
What happens to the present value of 1 one year from now if the market rate of interest falls? Explain.
 
  What will be an ideal response?

Question 2

Contractionary monetary policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.
 
  A) higher; higher B) higher; lower C) lower; lower D) lower; higher


durant1234

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Reply #1 on: Jun 29, 2018
Answer to Question 1

If the interest rate falls, the present value of 1 one year from now will increase. If the interest rate is lower, the amount you would have to set aside today to end up with 1 one year from now would be higher.

Answer to Question 2

C


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