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In 1975, interest rates were 7.89% and the rate of inflation was 12.31% in the United States. What was the real interest rate in 1975?
In 1975, interest rates were 7.89% and the rate of inflation was 12.31% in the United States. What was the real interest rate in 1975? How would the purchasing power of your savings have changed over the year? What was the real interest rate in 1975? The real rate of interest is - 3.94 %. (Round to two decimal places.) How would the purchasing power of your savings have changed over the year? (Select the best choice below.) O A. The growth in purchasing power 1 - inflation rate = 1 - 7.89% = 0.9211. Because of the high rate of inflation the purchasing power of money invested at 7.89% is actually losing purchasing power. OB. The growth in purchasing power 1 + real rate = 1 +(-3.94%) = 0.9606. Because of the high rate of inflation the purchasing power of money invested at 12.31% is actually losing purchasing power. OC. The growth in purchasing power 1 + real rate = 1 +(-3.94%) = 0.9606. Because of the high rate of inflation the purchasing power of money invested at 7.89% is actually losing purchasing power. OD. The growth in purchasing power 1 - inflation rate = 1 - 12.31% = 0.8769. Because of the high rate of inflation the purchasing power of money invested at 12.31% is actually losing purchasing power. Click to select your answer and then click Check
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