Ralph puts money in the bank and earns a 5 percent nominal interest rate. Then, if the inflation rate is 3 percent,
a. Ralph will have 3 percent more money, which will purchase 2 percent more goods.
b. Ralph will have 3 percent more money, which will purchase 8 percent more goods.
c. Ralph will have 5 percent more money, which will purchase 2 percent more goods.
d. Ralph will have 5 percent more money, which will purchase 8 percent more goods.
Answer: C