Question

Jake loaned Elwood $5,000 for one year at a nominal interest rate of 10 percent. After Elwood repaid the loan in full, Jake complained that he could buy 4 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $5,000. From this, we can conclude that the rate of inflation during the year was ______

Answer 1

Answer:

rate of inflation during the year was 14%

Explanation:

we know here Jake loaned Elwood = $5000

time = 1 year

rate = 10 %

rate = 4 %

so here we can say this will happen when actual inflation rate is high as compare to expected inflation rate

and we have given 10 % inflation rate need and

it was high by 4 % of fewer good

so rate is total 14%

so correct answer rate of inflation during the year was 14%