Question

Nominal and real rates Tyra loves to shop at her favorite store, Dollar Barrel, where she can find hundreds of items priced at exact . Tyra has $190 to spend and is thinking of going on a shopping spree at Dollar Barrel, but she is also thinking of investing her mon Ignore all sales and income taxes.) a. Suppose the expected rate of inflation is 1% (so next year, everything at that she invests. Approximately what real rate of interest could Tyra earn if she invests her money? How many items can she buy at Dollar Barrel today, and how many can she buy a year from now if she invests her money and goes shopping later? What is the Dollar Barrel wil cost S101) and Tyra can earn 4% on mon percentage increase in Tyra's purchasing power if she waits a year to go shopping2 Compare your answer to the approximate real rate of interest on Tyra's investment. b Now suppos e that the expected inflation rate is 10% and Tyra can earn 19% on money that she invests over the approximate real year. What is the rate of interest that Tyra will earm? Calculate the number of items that Tyra could buy next year from Dollar Barrel if she nvests her money, What is the percentage increase in her purchasing power if she waits a year to go shopping? Reiate your answer back to Tyra's real rate of return a. The real rate of interest that Tyra could eam if she invests her money, approximately, is Round to the nearest whole percent.) The number of items she can buy today is (Round to the nearest whole number) It she invests her money and goes shopping later, the number of items she can buy is whole number. Do not round up.) The percentage increase in Tyra's purchasing power if she waits a year to go shopping is Round to two decimal places) Compare your answer to the approximate real rate of interest on Tyra's investment (Select the best answer below.) Enter as a is O A. The real rate of interest is approximately equal to the difference between the nominal rate and the expected infiation rate O B. The real rate of interest is approximately equal to the nominal rate mutplied by the expected inflation rate. OC. The real rate of interest is approximately equal to the nominal rate plus the expected inflation rate ou aturit O D. The real rate of interest is exactly equal to the diélerence between the nominal rate and the expected inflation rate iscoun loatatic Click to select your anvsverla) 2 3 4 tab aps lock