You open a savings account with a 0.5% per year nominal interest rate, and the economy experiences 3% per year inflation. What is your nominal and real annual interest rate on the account? What will happen to the purchasing power of money you place in the account over time?
You open a savings account with a 0.5% per year nominal interest rate, and the economy experiences 3% per year inflation. What is your nominal and real annual interest rate on the account? What will happen to the purchasing power of money you place in the account over time?
Chapter13: Inflation
Section: Chapter Questions
Problem 12SQ
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You open a savings account with a 0.5% per year nominal interest rate, and the economy experiences 3% per year inflation. What is your nominal and real annual interest rate on the account? What will happen to the
purchasing power of money you place in the account over time?
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