Suppose prices increase by 4% per year.What nominal percentage return on your savings account would you require to get a 1% real return?
A) 0%
B) 2%
C) 5%
D) 7%

Name: Suppose prices increase by 4% per year.What nominal percentage return on your savings account would you require to get a 1% real return? A) 0% B) 2% C) 5% D) 7%
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Question

Quizplus · Accepted Answer

Since prices increase by 4% per year, to get a real return of 1%, we need a nominal return of 5% (4% + 1% = 5%). Therefore, the correct choice is C) 5%.

Suppose Prices Increase by 4% Per Year