Suppose the Annual Nominal Interest Rate Is 4 Percent and the Inflation

question 31

Multiple Choice

Suppose the annual nominal interest rate is 4 percent and the inflation rate is 5 percent. If you deposit $1,000, at the end of the year:

• A) you will have earned a real rate of return of 1 percent.
• B) your purchasing power will have increased.
• C) your savings will have a nominal increase of $40.
• D) All of these statements are true.

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Definitions:

Family Obligations

Responsibilities or duties one has towards family members, often due to cultural, social, or legal reasons.

Deadline Flexibility

The degree to which a time limit for completing a task can be adjusted or extended.

Important Decisions

Critical or significant choices that often have a long-term impact on one's personal or professional life.

Strong Relationship

A bond or connection between two or more entities characterized by mutual respect, trust, support, and understanding.