Which of the following computes the growth in purchasing power?
A) growth of money + growth of prices
B) (1 + real rate) / (1 + nominal rate)
C) (1 + inflation rate) / (1 + nominal rate)
D) growth of money / growth of prices

Question

Quizplus · Accepted Answer

Growth in purchasing power is essentially how much more (or less) you can buy with your money over time. It is calculated by dividing the growth of money (how much more money you have) by the growth of prices (how much prices have increased). This ratio shows how much the real value of your money has grown or shrunk, taking into account inflation.

Which of the Following Computes the Growth in Purchasing Power