Assume you have $2,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 120 at the end of the year,the real value of your savings is closest to
A)$1,667.
B)$1,880.
C)$2,120.
D)$2,400.

Question

Quizplus · Accepted Answer

The real value of the savings can be calculated by adjusting the nominal amount ($2,000) for the change in the price level from 100 to 120. This is done by dividing the nominal amount by the new price level (120) and then multiplying by the base price level (100). Thus, $2,000 * (100 / 120) = $1,666.67, which is closest to $1,667.

Assume You Have $2,000 in a Savings Account at the Beginning