Assume you have $1,000 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 115 at the end of the year,the real value of your savings is closest to
A)$870.
B)$885.
C)$1,115.
D)$1,150.

Question

Quizplus · Accepted Answer

The real value of savings is calculated by adjusting for inflation. If the price level increases from 100 to 115, the inflation rate is 15%. The real value of the savings is $1,000 / 1.15 = $869.57, which is closest to $870.

Assume You Have $1,000 in a Savings Account at the Beginning