Changes in future expected interest rates can affect current consumption. Suppose individuals expect future interest rates to decrease. Consumption will change as a result of this lower expected future interest rate because of its effects on which of the following?
A) human wealth
B) the value of stocks
C) the value of bonds
D) all of the above
E) none of the above
Question 2
With a nominal interest rate of 5, the present discounted value of 100 to be received in one year is
A) 90.91.
B) 95.23.
C) 181.82.
D) 190.00.
E) 220.00.
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