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

question 25

Multiple Choice

Suppose that the real 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 2 percent, and the value of savings measured in goods increased at 3 percent.
• B) The dollar value of savings increased at 1 percent, and the value of savings measured in goods increased at 2 percent.
• C) The dollar value of savings increased at 3 percent, and the value of savings measured in goods increased at 1 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:

Ability-to-pay Principle

A taxation principle suggesting that taxes should be levied according to an individual's or entity's capacity to pay, typically measured by income or wealth.

U.S. Labor Force

The total number of people in the United States who are employed or actively seeking employment.

U.S. Governments

The federal government of the United States, composed of three branches: legislative, executive, and judicial.

Property Taxes

Levies on property owned by individuals or entities, typically based on the property's value, and used as revenue for local governments.