Respuesta :
The buying power of your investment would increase by 2% after one year if your rate of return was 5% and the rate of inflation was 3%.
Rate of return = 5%
Rate of inflation =3%
5% - 3% = 2%
Thus the buying power will increase by 2%.
Rate of return = 5%
Rate of inflation =3%
5% - 3% = 2%
Thus the buying power will increase by 2%.
The buying power would increase by 2% when the rate of return is 5% and the rate of inflation is 3%.
Further Explanation:
Inflation refers to an increase in the price level of services and goods continuously over a time period. The inflation can be divided into the following categories:
• Demand-pull Inflation: It occurs when the demand for services and goods in an economy exceeds its production capacity or supply. The gap between supply and demand results in higher prices of goods and services.
• Cost-push Inflation: It occurs when the price of production input increases that result in an increase in prices of services and goods.
Calculate the increase in buying power:
[tex]\begin{aligned}\text{Increase in buying power}&=\text{Rate of return}-\text{Inflation rate} \\ &=5\%-3\%\\ &=2\%\end{aligned}[/tex]
Therefore, the increase in buying power is 2%.
Learn more:
1.Learn more about the consumer buying behavior
https://brainly.com/question/5906552
2.Learn more about the recording of purchase of asset
https://brainly.com/question/10517302
3.Learn more about the depreciation on the product
https://brainly.com/question/11220357
Answer details:
Grade: Middle School
Subject: Economics
Chapter: Inflation
Keywords: What, would, happen, to, the, buying, power, of, your, investment, after, one, year, if, your, rate, of, return, was, 5%, and, the, rate, of, inflation, was, 3%, inflation, growth, economics, micro-economics, rate.
