Abjihit deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Abjihit withdraws his $105. If inflation was 5 percent during the year the money was deposited, then Abjihit's purchasing power has not changed.

Question

Quizplus · Accepted Answer

The 5 percent interest rate on the deposit exactly offsets the 5 percent inflation rate, leaving Abjihit's purchasing power unchanged.

Abjihit Deposits $100 in a Bank Account That Pays an Annual