If the Value of Your Savings Is Increasing Over Time

question 162

Multiple Choice

If the value of your savings is increasing over time, it must be true that the inflation rate:

• A) is higher than the nominal interest rate.
• B) is lower than the nominal interest rate.
• C) and the nominal interest rate are the same.
• D) must be zero.

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Definitions:

Passbook Savings Accounts

A type of savings account where transactions are recorded in a physical booklet, traditionally offering low interest rates.

Double Coincidence of Wants

A situation in a barter system where two parties each hold an item the other wants, allowing them to exchange goods directly without the need for money.

M1

A category of the money supply that includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits.

Travelers Checks

Pre-printed, fixed-amount checks designed to allow the person signing them to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.