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Find the expected growth rate of the purchasing power

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Reference no: EM132667732

You just deposited $4,000 in a savings account paying 12% for one year. Suppose that the price level is expected to grow at a rate of 3% over the course of that year.

a. Find the expected growth rate of the purchasing power of your money. Make sure to show your work.

b. If the inflation rate turns out to be 3.75%, are you better off or worse off? Explain your answers.

Reference no: EM132667732

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