Suppose that you have received $300 as a birthday gift.You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest.The opportunity cost of spending the money today,in terms of what you could have after one year,is

Question

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The opportunity cost of spending the money today is the amount you would have if you saved it, which is the initial $300 plus 5% interest, totaling $315.

Suppose That You Have Received $300 as a Birthday Gift