Because the inflation rate is 10% and the bank has a real rate of interest of negative 5 percent per year, then:
- It is better to keep the money in the bank because the owner of the money would have a higher gain per year on the money deposited.
What is Inflation Rate?
This refers to the specified % increase or decrease in the prices of goods during a specific time period.
With this in mind, based on the fact that the inflation rate is 10% and the bank yields a real rate of interest of negative 5 percent per year, this is done to adjust the inflation rates and because the RII is 5% which is less than the 10% inflation rate, it is best to leave it in the bank.
Read more about inflation rates here:
https://brainly.com/question/777738
