Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?

Question

Business

Kaiya

17 May, 18:18

Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?

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Answers (1)

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Kate Powers · Answer 1

Less than today

Explanation:

The Correct answer for the given question is " less than today ".

The reason for the answer is that the inflation is the rate at which the price of of good rises and here the inflation rate is more than the interest rate, thus, the purchasing capability will decrease. The the money in account will not increase as much as the price of the goods rises.