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- Basic of Economicseconomics-mcqs › basic-of-economics
- Published
- 26 May 2019
- Last updated
- 28 May 2026
What term describes the interest calculated on both the initial principal and the interest accumulated from previous periods?
Multiple choice question for Basic of Economics. Select an option, then review the explanation below.
Explanation
Simple interest is calculated only on the original principal amount, not on the interest earned previously. Compound interest, on the other hand, is the interest earned on both the principal and the accumulated interest. Therefore, the correct term for interest paid on previously earned interest and principal is compound interest.
More Basic of Economics MCQs
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- 1.Which of the following best describes deflation?
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- 3.Which of the following represents a legitimate form of currency?
- 4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
- 5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?