Neco 2019 Economics Question 35

Practice objective / multiple choice question 35 from the 2019 Neco Economics examination.

Neco 2019 Economics Objective / Multiple Choice Medium Difficulty
Question 35 NECO • 2019 • ECONOMICS • objective

In 2020 the Consumer Price Index (CPI) was 120 and in 2021 it rose to 132. A savings account offers a nominal interest rate of 12 % per annum. Using the Fisher equation, compute the real interest rate for 2021 and the percentage change in the purchasing power of the savings after one year.

Answer Options

Correct Answer A. Real interest rate ≈ 1.8 %; purchasing power increases by about 1.8 %
B. Real interest rate ≈ 0.9 %; purchasing power increases by about 0.9 %
C. Real interest rate ≈ -1.0 %; purchasing power decreases by about 1.0 %
D. Real interest rate ≈ 2.5 %; purchasing power increases by about 2.5 %
Correct Answer
A
Correct Option:
Real interest rate ≈ 1.8 %; purchasing power increases by about 1.8 %

About This Question

This is Neco 2019 Economics Question 35. It is one of the objective questions from the 2019 Neco Economics examination.

Difficulty level: Medium .

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