If Over the Course of a Year the Inflation Rate

question 92

Multiple Choice

If over the course of a year the inflation rate was about 3.24%, and short-term government bonds offered a rate of 2.9%, which of the following statement is correct?

• A) The real interest rate for investors in these bonds was greater than the rate of inflation.
• B) Investors in these bonds were able to buy less at the end of the year than they could have purchased at the start of the year.
• C) The nominal interest rate offered by these bonds gave the true increase in purchasing power that resulted from investing in these bonds.
• D) The purchasing power of investors in these bonds grew over the course of the year.

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Definitions:

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