Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 2 - The Key Principles of Economics - Exercises - 2.5 The Real-Nominal Principle - Page 46: 5.1

Answer

\$1

Work Step by Step

The interest earned at 4% is \$4, but inflation means the money is worth less after one year. If the rate of inflation is 3%, the \$100 is worth \$3 less after one year. The real net gain from keeping the money in the bank is \$1.
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