If the annual inflation rate in an economy is i,then $1 borrowed at the beginning of a year will have the same purchasing power as ________ dollars at the end of the year.

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of money, so $1 at the beginning of the year will be equivalent in purchasing power to $1 plus the inflation rate (i) at the end of the year, hence (1 + i).

If the Annual Inflation Rate in an Economy Is I,then