Bob deposits $100 in a bank account that pays an annual interest rate of 5 percent. A year later, Bob withdraws his $105 . If inflation was 2 percent during the year the money was deposited, then Bob's purchasing power has increased by 3 percent
a. True
b. False
Indicate whether the statement is true or false
True
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
To maximize utility consumers should buy goods and services to the point where the marginal utility of each item consumed is maximized
Indicate whether the statement is true or false
An easier monetary policy ________ the user cost of capital, which ________ net investment
A) raises, raises B) raises, lowers C) lowers, raises D) lowers, lowers
Suppose we coupled the pay of Congress with the federal budget, so that for every billion dollars of deficit spending, a lawmaker's pay would be reduced $1,000 . How would this affect fiscal policy?