Gce Model Questions Vol1 2021 Economics Question 6

Practice objective / multiple choice question 6 from the 2021 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2021 Economics Objective / Multiple Choice Medium Difficulty
Question 6 GCE_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • objective

The Consumer Price Index (CPI) was \(120\) in 2018 and \(138\) in 2020. Assuming the inflation rate was constant each year, calculate the annual inflation rate. A savings account offers a nominal interest rate of \(8\%\) per annum. Using the Fisher approximation, determine the real interest rate earned in 2020.

Answer Options

A. Annual inflation ≈ 6.80 % and real interest rate ≈ 1.10 %
Correct Answer B. Annual inflation ≈ 7.24 % and real interest rate ≈ 0.71 %
C. Annual inflation ≈ 8.00 % and real interest rate ≈ -0.20 %
D. Annual inflation ≈ 7.00 % and real interest rate ≈ 0.50 %
Correct Answer
B
Correct Option:
Annual inflation ≈ 7.24 % and real interest rate ≈ 0.71 %

About This Question

This is Gce Model Questions Vol1 2021 Economics Question 6. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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