Katarina puts money into an account.One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods.

Question

Quizplus · Accepted Answer

If Katarina's money earns a nominal interest rate of 6%, and the goods she wants to buy are 4% more expensive, then her real interest rate is 2%. This is the difference between the nominal interest rate and the inflation rate (real interest rate = nominal interest rate - inflation rate). Therefore, of the options given, only (B) satisfies this condition. The other options either have a higher nominal interest rate or a higher inflation rate, which would result in a higher real interest rate.

Katarina Puts Money into an Account