Question 1:

One year ago you put $500 into a newly opened savings account earning 4 percent interest. On that day the consumer price index was 120. Today, the same consumer price index is 132.

1. The realized real rate of interest on your savings account was -2.0 percent.

2. $52 would have been sufficient to compensate you for the increase in prices that occurred during the year.

3. If the savings account had been indexed by the local CPI you would have about $572 in your account instead of the $520 you now have.

4. All of the above statements are true.

Choose the correct option.