On a financial television show, Paz hears the announcer say that the country is currently experiencing a high inflation rate. How will this MOST likely affect Paz’s investments?

A.
With the current high inflation rate, the value of Paz’s investments will possibly not increase at the same rate as the general level of inflation.

B.
This level of high inflation guarantees higher returns on Paz’s investments, making it a very safe investment.

C.
If the return on Paz’s investment is growing at a slower rate than the inflation rate, her investment will increase her purchasing power.

D.
If Paz’s investment is earning 2 percent interest, but the inflation rate on goods is increasing by 5 percent, she has gained about 3 percent of purchasing power.

Answer: With the current high inflation rate, the value of Paz’s investments will possibly not increase at the same rate as the general level of inflation.

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DUBEYSHAILJA64GO DUBEYSHAILJA64GO · Answer 2

Paz watches the announcer on a financial television program state that the nation is now facing a high inflation rate. This will affect Paz’s investments as the value of Paz’s investments will possibly not increase at the same rate as the general level of inflation. Thus the correct option Is A.

What is inflation?

Inflation is referred to as a phenomenon when the prices of goods and services increase for a certain period of time which restricts the purchasing power of the individual is called inflation.

Inflation affects investments as when the prices are high it lowers the value of securities. It will be considered negative effects on the investment related to bonds and other securities.

Therefore, option A investments will possibly not increase at the same rate as the general level of inflation will be appropriate.

Learn more about inflation, here:

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