Suppose that you put $100,000 in cash in a coffee can and hidit in your apartmen

Question

Suppose that you put $100,000 in cash in a coffee can and hidit in your apartment for one year, during which time inflation was5 percent. What has happened to the purchasing power of that$100,000? a. its purchasing power shrunk by $5000 b. its purchasing power stayed the same, $100,000 c. its purchasing power grew by $5000 d. None of the above Please also tell me why and how u got the answer Thanks Suppose that you put $100,000 in cash in a coffee can and hidit in your apartment for one year, during which time inflation was5 percent. What has happened to the purchasing power of that$100,000? a. its purchasing power shrunk by $5000 b. its purchasing power stayed the same, $100,000 c. its purchasing power grew by $5000 d. None of the above Please also tell me why and how u got the answer Thanks

Explanation / Answer

Purchasing Power decreases as the rate of things increase. Itcan be found by using the formula Ct=C(1+i)-t -->Ct=100,000(1+.05)-1= $95,238.10 So by sticking 100,000 in a coffee can for the one year, thecost of everything went up. your purchasing power of cash went downaround $5000. So I am going with a).

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