Suppose that over the past year,the nominal interest rate was 5 percent,the CPI was 150.3 at the end of the year,and the CPI was 144.2 at the beginning of the year.It follows that
A)the dollar value of savings increased at 5 percent,and the purchasing power of savings increased at 0.8 percent.
B)the dollar value of savings increased at 5 percent,and the purchasing power of savings increased at 9.2 percent.
C)the dollar value of savings increased at 0.8 percent,and the purchasing power of savings increased at 5 percent.
D)the dollar value of savings increased at 9.2 percent,and the purchasing power of savings increased at 5 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is 5%, and the inflation rate is calculated as ((150.3 - 144.2) / 144.2) * 100 = 4.23%. The real interest rate, which reflects the increase in purchasing power, is approximately 5% - 4.23% = 0.77%, rounded to 0.8%.

Suppose That Over the Past Year,the Nominal Interest Rate Was