Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100.If the price level is equal to 92 at the end of the year,the real value of your savings is closest to
A)$908.
B)$920.
C)$1,087.
D)$1,092.

Question

Quizplus · Accepted Answer

The real value of the savings increases as the price level decreases, meaning your money can buy more. To find the real value, divide the initial amount by the end-of-year price level (expressed as a fraction of the starting level, i.e., 92/100 = 0.92) and then multiply by 100 to adjust for the initial price level. This gives $1,000 / 0.92 = approximately $1,087.

Assume You Have $1,000 in a Savings Account at the Beginning