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: 5.2

Answer

You earn 5 percent interest on funds in your money –market account. If consumer prices increase by 7 percent per year, your earnings on 1,000 in the money-market account is $-20 per year.

Work Step by Step

To figure out your earning, you would subtract the increase in consumer price (7%) by the interest in your account (5%) 5% interest-7% consumer price = -2% Then you multiply that percent by the amount of money in the money market account (1000) 1000 x -.02 = -20.00
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.