Rosa deposits $100 in a bank account that pays an annual interest rate of 20 percent.A year later,after Rosa has accumulated $20 in interest,she withdraws her $120.Rosa's purchasing power
A)did not change if the inflation rate was 20 percent.
B)decreased if the inflation rate was -5 percent.
C)increased if the inflation rate was 22 percent.
D)More than one of the above is correct.

Question

Quizplus · Accepted Answer

If the inflation rate was 20 percent, the purchasing power of Rosa's $120 remains the same as her initial $100 because the increase in prices offsets the interest earned.

Rosa Deposits $100 in a Bank Account That Pays an Annual