Question

Assume that you are willing to postpone consumption today and buy a certificate of deposit (CD) at your local bank. Your reward for postponing consumption implies that at the end of the year ________.
A) you will be able to consume fewer goods
B) you will be able to buy the same amount of goods or services
C) you will be able to buy fewer goods or services
D) you will be able to buy more goods or services

Answer 1

Answer:

You will be able to Buy fewer goods or services

Explanation:

This is because certificate of deposits usually pay lower than the inflation rate.

The certificate of deposit is deposit with banks over a fixed period of time and accruing a specific pre-agreed rate of interest.

Over the life of the Certificate, the amount cannot be withdrawn. Withdrawing any or all of the deposits will result in penalty charges against the depositor.

Answer 2

Answer:

The correct answer is letter "D": you will be able to buy more goods or services.

Explanation:

A Certificate of Deposit (CD) is a basic financial product sold by banks, thrift organizations, and credit unions. Customers buy CDs to earn interest -usually higher- while keeping their money safe. Banks require CDs buyers to make the payment in a lump-sum and keep the amount of money untouched for a determined period of time.

Thus, by postponing consumption today and buying a CD, an individual will have more money after the CD duration ends since that person will have the original sum of the CD plus interest accrued. Then, that individual will be able to buy at will more goods or services than today.