If Over the Course of a Year the Inflation Rate

question 9

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)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.
• B)The real interest rate for investors in these bonds was greater than the rate of inflation.
• 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.