Question

If a person has money invested at 9 percent and the rate of inflation is 5 percent, how much return are they actually making on their investment?

Answer 1

1. An index determined by measuring the price of standard goods brought by urban consumers.

2. Producers raise prices to meet increased cost.

3. Demand-pull theory.

4. It rises

5. 4 percent.

Step-by-step explanation:

Answer 2

4%

Step-by-step explanation:

It is given that a person has money invested at 9 percent and the rate of inflation is 5 percent.

We need to find the actual interest rate.

Real interest rate = Rate of interest - Rate of inflation

Substitute the given values in the above formula to find the actual interest rate.

Real interest rate = 9% - 5%

Real interest rate = 4%

Therefore, the real interest rate on their investment is 4%.