At a price level of 100, John has savings equal to $20,000. If the price level increases to 130, the buying power of John's savings is approximately
A)$26,000.
B)$15,400.
C)$30,000.
D)$20,000.
E)$12,780.

Question

Quizplus · Accepted Answer

The buying power of savings decreases as the price level increases. The new buying power is calculated by dividing the original savings by the new price level ratio (130/100), which gives $20,000 / 1.3 = $15,384.62, approximately $15,400.

At a Price Level of 100, John Has Savings Equal