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Nominal Interest Rate (i)
Calculating Purchasing Power Change
A certificate of deposit (CD) at a local bank offers a 4% annual interest rate. Over the same one-year period, the general level of prices for consumer goods is expected to increase by 2.5%. In your own words, describe what the 4% rate represents and calculate the approximate percentage change in the real purchasing power of the money invested in this CD.
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CORE Econ
Economics
Social Science
Empirical Science
Science
Economy
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Assumption of No Inflation in the Intertemporal Choice Model
An individual takes out a one-year loan for 1,070. During that same year, the average price level of goods and services in the economy increased by 3%. Which statement best dissects the components of this financial arrangement?
Identifying the Nominal Interest Rate in a Loan Agreement
Calculating Purchasing Power Change
If you deposit money into a savings account that pays a 2% annual interest rate, and the economy experiences a 3% inflation rate over the same year, your purchasing power will have increased at the end of the year.
When a bank advertises a specific interest rate for a savings account, this publicly stated rate, which does not account for the potential erosion of purchasing power due to a general rise in prices, is referred to as the ______ interest rate.
Match each term to the description that best defines its economic meaning.
Evaluating the Usefulness of the Nominal Interest Rate
A saver is considering depositing $100 into a new savings account. Arrange the following steps in the logical order they would follow to determine the change in their actual purchasing power after one year.
A commercial bank advertises a savings account with a '5% Annual Percentage Rate (APR)'. If a customer deposits $1,000 into this account and there are no other fees or transactions, what does this 5% rate directly determine?
Calculating Loan Repayment Amount