The amount of money Shawheen deposited in his savings account increased in value because of the interest rate his account earns.
The initial deposit might have a higher purchasing power because of inflation.
When money is deposited in a savings account, the amount of money earns interest.
The value of the interest rate can be determined using this formula: interest earned / (time x amount deposited)
Interest earned = $$5,306.04 - $5,000 = $306.04
Interest rate = $306.04 / (3 x $5000) = 2.04%
Inflation is the persistent rise in the general price levels. Inflation reduces the purchasing power of money.
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If the marginal propensity to consume is 0.6, then real GDP will increase by $250 billion.
<h3>What will be the real GDP?</h3>
Real GDP is the gross domestic product of a country that has been adjusted for inflation. Gross domestic product is the total value of all the final goods and services that is produced by a country in a particular period.
Marginal propensity to consume is portion of disposable income that is spent on consumption. Marginal propensity to consume can also be described as the amount of real GDP that is spent on consumption. When spending increases, the value of the real GDP would also increase. The increase in real GDP would be as a result of an increase in spending and saving.
Increase in Real GDP = (MPC x increase in spending) + (MPS x increase in spending)
(100 x 0.6) + [(1 - 0.6) x 100 ] = $250 billion
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Answer:
Explanation:
Changes in the supply of melon
is brought about both positive and negative factors affecting supply of melon apart from the price of melon
Answer:
1. The overall goal and/or purpose
The overall goal of this analysis is to determine if you would actually save money by purchasing the extended warranty.
2. The given information
You can calculate this by determining the present value of the expected repair costs that will be covered by the warranty and determine which is higher; the warranty or the repairs
3. A time-line for the expected repair costs covered by the warranty
- initial investment -$1,800
- cash flow year 4 = $400
- cash flow year 5 = $500
- cash flow year 6 = $600
- cash flow year 7 = $800
4. The present value for each of the repair costs
the discount rate is 7%, so the present value of each repair cost is:
- PV cash flow year 4 = $400 / 1.07⁴ = $305
- PV cash flow year 5 = $500 / 1.07⁵ = $356
- PV cash flow year 6 = $600 / 1.07⁶ = $400
- PV cash flow year 7 = $800 / 1.07⁷ = $498
- total $1,559
5. The present value of the warranty and the expected profit for the warranty company
the present value of the warranty is $1,800, so the car company is making $1,800 - $1,559 = $241 in profits by selling you the warranty
6. Your conclusion
You shouldn't buy the extended warranty (negative NPV)
Many personal care companies combine toothpaste with a toothbrush at a reduced price. Another example is fast food chains that combine a sandwich, fries and a drink for a lower price over purchasing them separately. This is also true for cable companies giving you a better deal if you purchase T.V., home phone and internet. This helps insure they are keeping your business for all services on the market.