Suppose That the Nominal Interest Rate Was 3 Percent and the Inflation

question 107

Multiple Choice

Suppose that the nominal interest rate was 3 percent and the inflation rate was 1 percent. What happened with the value of savings?

• A) The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent.
• B) The dollar value of savings increased at 2 percent, and the value of savings measured in goods increased at 3 percent.
• C) The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 2 percent.
• D) The dollar value of savings increased at 4 percent, and the value of savings measured in goods increased at 3 percent.

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Definitions:

Net Operating Income

A company's income after operating expenses have been subtracted but before deducting interest and taxes.

Unit Sales

The number of individual items or units sold within a specific period, often used as a measure of a company's performance.

Traceable Fixed Expense

Fixed costs that can be directly linked to a specific department, product, or segment, helping in the evaluation of its profitability.

Price Increase

Adjusting the selling price of goods or services upwards, often as a response to inflating costs or improving margin.