A-LevelEconomicsThe macroeconomy9708/12 · May/June 2015 · Q251 Mark

In an economy with an interest rate of 4% per annum, the rate of inflation falls from 5% to 3% per annum. What will be a benefit of this fall?

AMenu costs will fall to zero.

BPeople on fixed incomes will be better off in real terms.

CSavers will gain in real terms.

DThe purchasing power of the currency will rise.

✓ Correct answer

C: Savers will gain in real terms.

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Topic: The macroeconomy, A-Level Economics (syllabus 9708). Multiple choice, 1 mark.
Source: A-Level Economics, May/June 2015 Paper 1 Variant 2, question 25.

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