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user_name -- you need an interest rate and a discount rate -- you want to compare the value of $40,000 next year to the present discounted value of higher earnings in the future. One of the basic assumptions in macro (and in micro) is that people value money today more than money tomorrow, so when you do the comparison, you have to build that in to the computation. The discount rate quantifies a person's willingness to trade money (or happiness, or whatever) today for money tomorrow. You can think of it as representing impatience.
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