The proposition that the price of a resource is expected to rise at a rate equal to the interest rate is called the
A) discounted present value.
B) Hotelling Principle.
C) diminishing marginal revenue product.
D) derived demand for productive resources.

Question

Quizplus · Accepted Answer

The Hotelling Principle suggests that the price of a non-renewable resource, like oil or minerals, is expected to increase at a rate equal to the interest rate over time. This is because the opportunity cost of keeping the resource in the ground is the interest that could have been earned if the money from selling the resource were invested.

The Proposition That the Price of a Resource Is Expected