Suppose the Nominal Interest Rate Is 7 Percent Annually, and You

question 43

Multiple Choice

Suppose the nominal interest rate is 7 percent annually, and you deposit $1,000. Inflation in the economy throughout the year is 7 percent. At the end of the year, you have earned:

• A) an increase in your purchasing power.
• B) no increase in your purchasing power.
• C) no increase in your savings.
• D) a decrease in your purchasing power.

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