you have been diligently saving money in an account that earns an annual interest of 4%. however, you learn…

you have been diligently saving money in an account that earns an annual interest of 4%. however, you learn that the inflation rate for the current year has been 5%. given this scenario, what is the real effect on your savings? choose 1 answer: a your savings are losing value. b your savings are earning value. c neither losing nor earning value

you have been diligently saving money in an account that earns an annual interest of 4%. however, you learn that the inflation rate for the current year has been 5%. given this scenario, what is the real effect on your savings? choose 1 answer: a your savings are losing value. b your savings are earning value. c neither losing nor earning value

Answer

Answer:

A. Your savings are losing value.

Brief Explanations:

The inflation rate (5%) is higher than the interest - rate (4%). So, in real terms, the purchasing power of savings is decreasing.