Suppose a bank will pay you 10% interest rate on your deposits and the rate of deflation is 5 percent. Then for every 1000 of consumption you enjoy in this period you effectively forego:

A $1100 of future consumption in real terms

B More than$1100 of future consumption in real terms

C More than $1000 but less than $1100 of future consumption in real terms

D Less than $1000 of future consumption in real terms

If consumers rationally allocate their consumption in an inter-temporal sense, then a deflationary environment, though its impact on consumer expectations:

A Is bad for economic activity as it reduces the incentive to spend now

B Is good for economic activity as lower prices stimulate spending

C We cannot say what impact it will have on current spending

D Is irrelevant as far as spending decisions are concerned