Answered: n 2020, interest rates were 9.2% and…

n 2020, interest rates were 9.2% and the rate of inflation was 11%. What was the real interest rate in 2020? How would the purchasing power of your savings have changed over the year?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 4.10P

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Question

4.In 2020, interest rates were 9.2% and the rate of inflation was 11%. What was the real
interest rate in 2020? How would the purchasing power of your savings have changed over
the year?

Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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