Question

Suppose you have $10,000 in savings when the price level index is at 100. Instructions: Enter your responses rounded to the nearest whole number. a. What is the real value of your savings if the price level increases by 6 percent for the year

Answer 1

Answer: $9091

Step-by-step explanation:

The real value of the savings if the price level increases by 6 percent for the year will be calculated thus:

Real Value = Nominal Value × CPI of previous year / CPI of current year

The CPI of current year will be:

= 100 + (100 × 10/100)

= 110%

Then, the real value will be:

= $10000 × 100/ 110

= $9091