Which of the following formulas gives you the growth in purchasing power?
A)(1 + inflation rate)/(1 + nominal rate)
B)growth of money/growth of prices
C)(1 + real rate)/(1 + nominal rate)
D)growth of money + growth of prices

Question

Quizplus · Accepted Answer

The growth in purchasing power can be understood as how much more (or less) you can buy with your money over time, which is effectively captured by comparing the growth of money (how much more money you have) to the growth of prices (how much more expensive things have become). This ratio shows whether your money's growth outpaces or lags behind price increases, directly reflecting changes in purchasing power.

Which of the Following Formulas Gives You the Growth in Purchasing