If the Purchasing Power of Your Savings Is Increasing Over

question 128

Multiple Choice

If the purchasing power of your savings is increasing over time, we know that:

• A) the real rate of interest is positive.
• B) if the nominal interest rate is zero, inflation must be negative.
• C) the inflation rate must be less than the nominal rate of interest.
• D) All of these statements are true.

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Definitions:

Recession

A period of economic decline across an economy lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Demand

Refers to the desire and willingness of consumers to purchase goods and services at different prices.

Income Elasticity of Demand

An indicator of the variation in the demand for a product as a result of changes in the income levels of consumers.

Normal Good

A good for which demand increases when consumer income rises, and decreases when consumer income falls.