You Loaned $100 to a Friend for One Year at a Nominal

question 70

Multiple Choice

You loaned $100 to a friend for one year at a nominal rate of interest of 5 percent. Inflation during that year was 8 percent. How much did the purchasing power of your money change (an increase is positive and a decrease is negative) ?

• A) increase by around 3 percent.
• B) decrease by around 3 percent.
• C) increase by around 13 percent.
• D) decrease by around 13 percent.