Question

Melanie decided to save 20% of her annual earnings for 10 years so she would have a down payment for a house. After 5 years, what change in the economy would cause a decrease in the purchasing power of the funds she has managed to save?

Answer 1

inflation

Step-by-step explanation:

Inflation is the increase of prices of goods or services in an economy. In inflation the price of products are relatively high than the earlier price of the products. Inflation reduces the purchasing power of humans. It also reduces the value of money. One has to spend more in order to purchase something as compared to earlier.

In the context, inflation reduces the purchasing power of Melanie to buy a house.

Hence the answer is --Inflation.