Question

4. If interest rates are at a level of 1% and expected inflation is 2%, would you prefer saving or spending your money?

Answer 1

I would rather save the money because inflation could possibly decrease in the future

Answer 2

If the Interest rate is only 1% and the inflation rate is 2%, I would rather spend and invest my money rather than save it.

This is because, if I save my money in the back it might grow at 1% every year. However, the 2% inflation rate means that I would actually be decreasing my savings by 1% every year.

It will only be a loss for me to save my money in the bank. I would rather invest that money and try to make it grow and beat inflation.

Options for investment can include bonds, shares and real estate.