Which of the following is correct about inflation?

A. As the inflation rates increases, the interest rates offered to savers decrease.

B. If you earn 5% and inflation is 10%, your buying power will increase.

C. In order to increase buying power, you need to earn a rate higher than the rate of inflation.

D. Inflation does not affect interest rates for savings accounts.

E. If inflation is 7% and your rate of return in your savings account is 4%, you will experience an overall gain in buying power.

Question

Cassie Jefferson

Business

27 January, 12:32

Which of the following is correct about inflation?

A. As the inflation rates increases, the interest rates offered to savers decrease.

B. If you earn 5% and inflation is 10%, your buying power will increase.

C. In order to increase buying power, you need to earn a rate higher than the rate of inflation.

D. Inflation does not affect interest rates for savings accounts.

E. If inflation is 7% and your rate of return in your savings account is 4%, you will experience an overall gain in buying power.

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Answers (1)

Know the Answer?

Ashlee Salinas · Answer 1

C. In order to increase buying power, you need to earn a rate higher than the rate of inflation.

Explanation:

Price of different thing which we need, increases with inflation rate. Your buying power will be determined by netting your earning and expenditures of a specific period. If you are earning more than your spending then you have some savings and your buying power increases. On the other hand if your earning is less than your spending then your buying power decreases because you don't have savings.