Pete puts $100 in a savings account that pays an annual interest rate of 10 per cent. By the end of the year, the CPI has increased from 120 to 130. The purchasing power of Pete's bank account has remained unchanged.

Question

Quizplus · Accepted Answer

Inflation reduces the purchasing power of money over time. Therefore, even though Pete earned interest on his savings account, the increase in CPI means that the cost of goods and services has increased, and his purchasing power has decreased. Thus, the statement is false.

Pete Puts $100 in a Savings Account That Pays an Annual