When Terry retired from Caterpillar, he received a pension: Caterpillar would pay him $50,000 the first year he was retired, with the amount increasing by 5 percent each year thereafter. If inflation turned out to be 2 percent each year, what would happen to the real value of Terry's pension? A. It would decrease each year by 5 percent. B. It would increase each year by 3 percent. C. It would increase each year by 5 percent. D. It would decrease each year by 3 percent.
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