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 95 at the end of the year,the real value of your savings is closest to
A)$1,900.
B)$1,905.
C)$2,095.
D)$2,105.

Question

Quizplus · Accepted Answer

The real value of savings increases when the price level decreases. If the price level drops from 100 to 95, the real value of the savings increases by approximately 5%. Therefore, $2,000 * (100/95) = $2,105.

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