Suppose Prices Increase by 4% Per Year

question 94

Multiple Choice

Suppose prices increase by 4% per year.What nominal percentage return on your savings account would you require to get a 1% real return?

• A) 0%
• B) 2%
• C) 5%
• D) 7%

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Definitions:

Physical Sciences

Branches of science that study inanimate natural objects, including astronomy, chemistry, physics, and earth sciences.

Other-Things-Constant Assumption

The assumption, when focusing on the relation among key economic variables, that other variables remain unchanged; in Latin, ceteris paribus.

Rational Self-Interest

Each individual tries to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit.

Economic Actors

Individuals, companies, and organizations involved in the production, distribution, and consumption of goods and services.