Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy more than, exactly the same as, or less than today with the money in this account

Respuesta :

Answer: less than today with the money in this account

Explanation:

If your savings are accruing at a rate of 1% per year yet inflation is increasing at 2%, it means that after a year you can only buy less than you could the year before.

Inflation refers to the general rise in prices of goods and services and if it is increasing at a faster rate than your savings, it would follow logically that you can only buy less than you could before. In this case you would be able to buy 1%(2% - 1%) less than you could before.