Ralph puts money in the bank and earns a 5 percent nominal interest rate. What happens if the inflation rate is 3 percent?
A) Ralph will have 3 percent more money, which will purchase 2 percent more goods.
B) Ralph will have 3 percent more money, which will purchase 8 percent more goods.
C) Ralph will have 5 percent more money, which will purchase 2 percent more goods.
D) Ralph will have 5 percent more money, which will purchase 8 percent more goods.
Correct Answer:
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