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Suppose that you invest $ 1,000 today at an annual rate of 8%. Assuming that the expected annual rate of inflation is 3%, what will be your increase in purchasing power in percentage terms

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Answer:

Increase in income (in percentage)= 5% annual

Explanation:

Giving the following information:

Suppose that you invest $ 1,000 today at an annual rate of 8%. Assuming that the expected annual rate of inflation is 3%.

Your real purchasing power is determined by the increase in the nominal amount of money and the inflation rate. The first one increases purchasing power. The second one decreases it.

Increase in income (in percentage)= 8 - 3= 5% annual

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