Question

Click Submit to complete this assessment Question 30 uestion 30 2 points Save Answ Bob deposits $100 in a bank account that pays an annual the money was deposited, then Bob's purchasing power has increased by 3 percent interest rate of 5 percent. A year later, Bob withdraws his $105. If inflation was 2 percent during the year O True O False à Click Submit to complete this assessment « Question 30 of 30 8

Answer 1

Ans: True

Explanation:

Purchasing power is measured by real interest rate

Real interest rate = Nominal interest rate - Inflation rate

= 5% - 2% = 3%

Thus, the purchasing power increases by 3%. So, the statement is true.