Suppose the nominal interest rate is 10 percent annually, and you deposit $1,000. Inflation in the economy throughout the year is 6 percent. At the end of the year, you have earned:
A. a real rate of return of 4 percent.
B. an increase in your purchasing power.
C. a nominal increase in your savings of $100.
D. All of these statements are true.
D. All of these statements are true.
You might also like to view...
Which of the following documents established "rules of the game"?
A) The Book of Exodus B) The Scrabble Players Dictionary C) The Bylaws of the AFL-CIO D) The Constitution of South Africa E) All of the above.
A newspaper story on the effect of higher milk prices on the market for ice cream contained the following:
"As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent." Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001. Based on the information given, what is the price elasticity of demand for ice cream? A) 12% B) 0.75 (in absolute value) C) 1.33 (in absolute value) D) We do not have enough information to calculate the elasticity.