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Sandra has $500 in a savings account that earns 1% annual interest. She
leaves that money in the account for 5 years. If inflation averaged 2% pel
year, what happened to the purchasing power of her savings?
•
It increased
It decreased
It stayed the same
It matched inflation

Sagot :

adioabiola

The purchasing power of Sandra's savings according to the description above has decreased.

What happens to the purchasing power of Sandra's savings?

It follows from the task content that Sandra's savings attracted an annual interest rate of 1% while the inflation is 2% per annum. On this note, it follows that Sandra's savings purchasing power has reduced as the prices of commodities have gone up and the interest rate is unable to match it.

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