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Suppose Your Bank Pays You 4 Percent Interest Per Year

Question 36

Multiple Choice

Suppose your bank pays you 4 percent interest per year on your savings account, so that $1,000 grows to $1,040 over a one-year period. If prices increase by 1 percent per year over that time, approximately how much real value do you gain by keeping $100 in the bank for a year?


A) $0
B) $10
C) $30
D) $50

Correct Answer:

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