Real Rate of Return on US Currency (1900–2020)
A time-series graph, referenced as Figure 6.17a, presents the real rate of return on holding physical US dollar currency from 1900 to 2020. This real return is calculated as the negative of the inflation rate. The visualization shows that the return was negative for most of the period, indicating that the currency's purchasing power was typically eroded by inflation. The data also highlights significant volatility over the century.
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Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
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Real Rate of Return on US Currency (1900–2020)
Evaluating a Savings Strategy
An individual decides to store $1,000 in physical cash under their mattress for one year. During that year, the economy experiences an annual inflation rate of 4%. What is the real rate of return on this cash at the end of the year?
Purchasing Power of Cash
An investor observes that over the past year, the general price level of goods and services increased by 5%. If this investor had held their wealth entirely in physical currency during this period, which statement best analyzes the change in their purchasing power?
In any economic environment, holding physical currency for a year will always result in a loss of purchasing power.