Americans who invested in six-month bank certificates of deposit earned 3.2% between 2009 and 2012 before tax, whereas consumer prices rose by 6.6%. The financial-repression levy was therefore 3.2 %. In Britain even savers who put cash in the best tax-free individual savings accounts would have earned a cumulative 11% between 2009 and 2012, during which time consumer prices rose by 13.4%. Outside that tax shelter, middle-class savers who pay a marginal tax rate of 40% would have earned a net return of 6.6%. In real terms, their savings would have declined by 6%.
Which of the following is an assumption on which the argument depends?
A) Savers in America and Britain have seen a hit to their purchasing power in the form of negative real interest rates.
B) Real interest rates can be negative when nominal interest rates are below inflation.
C) Interest rates rise relative to the economic growth of a country.
D) Savings yield real returns only when they enhance the purchasing power of savers capital.
E) The purchasing power of deposits is reduced relative to the nominal size of deposits due to financial repression.![]()
Which of the following is an assumption on which the argument depends?
A) Savers in America and Britain have seen a hit to their purchasing power in the form of negative real interest rates.
B) Real interest rates can be negative when nominal interest rates are below inflation.
C) Interest rates rise relative to the economic growth of a country.
D) Savings yield real returns only when they enhance the purchasing power of savers capital.
E) The purchasing power of deposits is reduced relative to the nominal size of deposits due to financial repression.