The statement that is TRUE is: Sids purchasing power is decreasing by 1.5% per year
Purchasing power can be defined as the amount or number of goods and services that a person can purchase with the money he or she has.
Due to Inflation which is the rise in price of goods and services purchasing power of money begins to fall or become progressively worse.
Which is why Consumer Price Index (CPI) is often use to determine the averagely change in purchasing power that occur based on the number of goods and services purchased by consumer.
Based on the given scenario if he is earning 0.5% interest while is inflation is running as 2% per year is purchasing power is decreasing by 1.5% per year:
Calculated as:
Purchasing power=Interest-Inflation
Purchasing power=0.5%-2%
Purchasing power=-1.5% decrease
Inconclusion The statement below is TRUE is Sid's purchasing power is decreasing by 1.5% per year.
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