What would happen to the buying power of your investment after one year if your rate of return was 5% and the rate of inflation was 3%?

The buying power would increase by 2% when the rate of return is 5% and the rate of inflation is 3%.

Further Explanation:

Inflation refers to an increase in the price level of services and goods continuously over a time period. The inflation can be divided into the following categories:

•Demand-pull Inflation: It occurs when the demand for services and goods in an economy exceeds its production capacity or supply. The gap between supply and demand results in higher prices of goods and services.

•Cost-push Inflation: It occurs when the price of production input increases that result in an increase in prices of services and goods.

Calculate the increase in buying power:

Therefore, the increase in buying power is 2%.

Learn more:

1.Learn more about the consumer buying behavior

2.Learn more about the recording of purchase of asset

3.Learn more about the depreciation on the product

Answer details:

Grade: Middle School

Subject: Economics

Chapter: Inflation

Keywords: What, would, happen, to, the, buying, power, of, your, investment, after, one, year, if, your, rate, of, return, was, 5%, and, the, rate, of, inflation, was, 3%, inflation, growth, economics, micro-economics, rate.

answer; ( prices are sticky);