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Author Question: Suppose you postpone consumption so that by investing at 8 you will have an extra 800 to spend in ... (Read 103 times)

sheilaspns

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on: Jul 10, 2018
Suppose you postpone consumption so that by investing at 8 you will have an extra 800 to spend in one year. Suppose that inflation is 4 during this time. What is the approximate real increase in your purchasing power?
 
  A) 800
  B) 600
  C) 400
  D) 200

Question 2

Suppose you postpone consumption and invest at 9 when inflation is 3. What is the approximate real rate of your reward for saving?
 
  A) 3
  B) 5
  C) 6
  D) 7


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ApricotDream

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: C
Explanation: C) We can see that an inflation rate of 4 is one-half of our 8 rate of investment. Thus, one-half of the 800, or 400, is the real increase in your purchasing power.

Answer to Question 2

Answer: C
Explanation: C) We can see that an inflation rate of 3 is 6 less than our 9 investment rate. Thus, 6 is the real rate of your reward for saving.


sheilaspns

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Reply 2 on: Jul 10, 2018
Thanks for the timely response, appreciate it

kthug

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Reply 3 on: Yesterday
Wow, this really help

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