Question

You put money in the bank. The increase in the dollar value of your savings a. and the change in the number of goods you can buy with your savings are both nominal variables. b. is a real variable, but the change in the number of goods you buy with your savings is a nominal variable. c. is a nominal variable, but the change in the number goods you can buy with your savings is a real variable. d. and the change in the number of goods you can buy with your savings are both real variables.

Answer 1

Answer:

c. is a nominal variable, but the change in the number goods you can buy with your savings is a real variable.

Explanation:

The change in the value of the money that you put in the bank is a nominal variable: it gains value because of the interest rate that the bank pays, but it does not account for inflation.

This nominal value becomes a real value when it is used to buy goods and services. Because goods and services are subject to inflation, any inflation that the goods and services are carrying, will either reduce or increase the real value of the savings, depending on whether inflation was higher than the interest earned or not.