When estimating the benefits of improved environmental quality, the practice of discounting

Question

Quizplus · Accepted Answer

The practice of discounting reduces the relative value of benefits that are further in the future, as they are worth less than immediate benefits when adjusted for the time value of money. However, it is still necessary to use discounting in benefit estimation to account for inflation and opportunity costs. Option A is incorrect because discounting does not decrease the relative value of programs that yield immediate benefits, but instead increases their relative value. Option C is incorrect because uncertainty about the discount rate does not mean that discounting should be rejected altogether, but rather that uncertainty should be taken into account in the selection of an appropriate discount rate.

When Estimating the Benefits of Improved Environmental Quality, the Practice