0 Question 17 Please work through the following example: Suppose you collect coffee mugs and have $300 to spend on mugs today. If mugs are $5 each, how many mugs can you buy? After taking a finance class, you think about the idea of saving your $300 to make some interest and hopefully buy more mugs next year. The bank offers you a 10% interest rate on your deposit and you deposit your $300. When you withdraw your money in a year, how much will you have? $ But after waiting a year, mugs have increased in price to $6 each. With the money you withdrew, how many mugs can you afford to buy? Did your purchasing power of mugs increase by 10%, the nominal interest rate? (enter one word: yes or no) Is the REAL interest rate positive or negative? negative) (enter one word: positive or
0 Question 17 Please work through the following example: Suppose you collect coffee mugs and have $300 to spend on mugs today. If mugs are $5 each, how many mugs can you buy? After taking a finance class, you think about the idea of saving your $300 to make some interest and hopefully buy more mugs next year. The bank offers you a 10% interest rate on your deposit and you deposit your $300. When you withdraw your money in a year, how much will you have? $ But after waiting a year, mugs have increased in price to $6 each. With the money you withdrew, how many mugs can you afford to buy? Did your purchasing power of mugs increase by 10%, the nominal interest rate? (enter one word: yes or no) Is the REAL interest rate positive or negative? negative) (enter one word: positive or
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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