Many economists view a 3% annual inflation rate as "acceptable". Assuming a 3% annual increase in the price of automobiles, how much will a new Suburban cost you five years from now, if today's price is $48,000?
A) $41,405
B) $48,000
C) $54,024
D) $55,200
E) $55,645

Question

Quizplus · Accepted Answer

To calculate the future cost, use the formula for compound interest: Future Value = Present Value * (1 + rate)^n. Here, Present Value = $48,000, rate = 0.03, and n = 5. So, $48,000 * (1.03)^5 = $55,645.

Many Economists View a 3% Annual Inflation Rate as "Acceptable