ob is a business analyst who argues that investing makes more profit when the inflation rate is high. He points to the high returns in the 1980s when inflation was around 12% and returns were as high as 20% or higher. Evaluate Rob's claim.

Select the best answer from the choices provided.
Rob is correct because stocks and other goods increase in value due to inflation.
Rob is confusing the nominal rate of return with the real rate of return.
Rob is forgetting that inflation causes most businesses to do poorly.
Rob is correct because inflation enables dollar profits to buy more goods.

Question

ob is a business analyst who argues that investing makes more profit when the inflation rate is high. He points to the high returns in the 1980s when inflation was around 12% and returns were as high as 20% or higher. Evaluate Rob's claim.


Select the best answer from the choices provided.
Rob is correct because stocks and other goods increase in value due to inflation.
Rob is confusing the nominal rate of return with the real rate of return.
Rob is forgetting that inflation causes most businesses to do poorly.
Rob is correct because inflation enables dollar profits to buy more goods.

anonymous · Answer

*Rob

ganeshie8 · Answer

what do you think ?
Is it any good if your salary increases by $500 and the cost of beer case also increases by $500 ?

anonymous · Answer

makes no different

ganeshie8 · Answer

exactly ! so 20% returns make no difference if the inflation also increases

ganeshie8 · Answer

So the flaw in Rob's argument is that he is only considering the `nominal rate of return` and no the `real rate of return`

anonymous · Answer

Right 
Which is the right answer?