The Canadian consumer price index fell from 9.2 in 1929 to 7.1 in 1933.Consequently,a Canadian who saved Canadian dollars in a piggybank from 1929 to 1933 received a windfall gain equivalent to a real rate of return of _______ on his piggybank savings.Such a high real return on cash hoarding suggests that savers would have ________ incentive to make their money available for productive investments during periods of ________.

Question

Quizplus · Accepted Answer

The real rate of return is calculated based on the change in the consumer price index, which indicates deflation. During deflation, the purchasing power of money increases, leading to a real return on savings. The correct real rate of return is 22.8%, and during deflation, there is little incentive to invest in productive investments.

The Canadian Consumer Price Index Fell from 9