The choice of a discount rate is influenced by
A) time preference.
B) whether the effects cross generations.
C) the rate of inflation.
D) all of the above.

Question

Quizplus · Accepted Answer

All three factors - time preference, intergenerational effects, and inflation - can influence the choice of a discount rate. Time preference refers to the preference for present consumption over future consumption, which can lead to a higher discount rate. Intergenerational effects refer to the fact that some policies may have impacts that extend beyond the current generation, which can lead to a lower discount rate. Inflation can also impact the choice of a discount rate, as higher inflation may require a higher discount rate to account for reduced purchasing power in the future. Therefore, considering all three factors is important in determining an appropriate discount rate.

The Choice of a Discount Rate Is Influenced by