SOLUTION: Sara has $100 dollars in currency and 2,000 in a bank account which the bank pays no interest.The inflation rate is 2 percent a year . Calculate the rate of inflation Sara pays

Question 884563: Sara has $100 dollars in currency and 2,000 in a bank account which the bank pays no interest.The inflation rate is 2 percent a year .
Calculate the rate of inflation Sara pays in a year.
Answer by JulietG(1812) (Show Source): You can put this solution on YOUR website!
The *rate* of inflation is 0 (no interest) - 2%. The rate of inflation is 2% per year.
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The AMOUNT she loses due to inflation is 0. She still has the same amount of money. However, that money loses its purchasing power. The same amount of money buys fewer goods. The purchasing power lost is ($2,000 + $100) * .02, or $42.
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In simple terms, inflation is an increase in the money supply.
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