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Suppose that a person earns $75,000 now and anticipates a 4% raise next year. The current nominal interest rate on savings is 5%. Prices are

Suppose that a person earns $75,000 now and anticipates a 4% raise next year. The current nominal interest rate on savings is 5%. Prices are also expected to rise 2% next year.

In real terms, how much can the person consume next year in real terms if they currently spend $65,000 on goods & services?

*The answer is not $66,176.47

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