Suppose your bank pays you 5% interest per year on your savings account.If prices increase by 3% per year over that time,approximately how much real value do you gain by keeping $100 in the bank for a year?

Question

Quizplus · Accepted Answer

The real value gained is calculated by subtracting the inflation rate from the interest rate. Here, 5% interest - 3% inflation = 2% real gain. On $100, a 2% gain is $2.

Suppose Your Bank Pays You 5% Interest Per Year on Your