Question

8. The discount rate plays an important role in problems involving long time horizons such as climate change. Suppose that a particular strategy for reducing emissions of greenhouse gases that cause climate change would result in a S500 billion reduction in damages 50 years into the future. a. Assuming a discount rate of 10 percent, calculate the maximum amount that should be spent now to eliminate those damages? b. How would the maximum amount spent now to eliminate those damages change if the discount rate is 2 percent, rather than 10 percent?

Answer 1

10 calcudak maimum amount thad shouddl be tno to elinunak dam Ce clan reent a those 1+25? yeaor soo Sili im Therefore, mazi mum Omount tonv