During a certain year,the consumer price index increased from 120 to 132 and the purchasing power of a person's bank account increased by 4 percent.For that year,
A)the nominal interest rate was 6 percent.
B)the nominal interest rate was 14 percent.
C)the inflation rate was 12 percent.
D)the inflation rate was 9 percent.

Question

Quizplus · Accepted Answer

To find the nominal interest rate, we need to subtract the inflation rate from the increase in purchasing power.

Increase in purchasing power = 4%

Inflation rate = ((132-120)/120) x 100% = 10%

Nominal interest rate = 4% + 10% = 14%

Therefore, answer B is correct.

During a Certain Year,the Consumer Price Index Increased from 120