a SAVER HAS A $1000 ON DEPOSIT IN AN ACCOUNT EARNING 3 PERCENT INTEREST. dURING THIS YEAR THE INFLATION RATE WAS 5 PERCENT. AFTER ONE YEAR EHAT IS THE BUYING POWER OF THE AMOUNT IN SAVINGS FOR THAT PERSON?

1 answer

$1000 x 0.03 = 30 so the saver as $1030 at the end of the year.
But $1030 is worth only 1030 x 0.95 = $978.50 buying power using the previous year as a base.