James took out a fixed-interest-rate loan when the CPI was 200 . He expected the CPI to increase to 206 but it actually increased to 204 . The real interest rate he paid is
a. higher than he had expected, and the real value of the loan is higher than he had expected.
b. higher than he had expected, and the real value of the loan is lower than he had expected.
c. lower than he had expected, and the real value of the loan is higher than he had expected.
d. lower then he had expected, and the real value of the loan is lower than he had expected.
a
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The opportunity cost of current household consumption is the
a. wage rate. b. market interest rate. c. price of the goods consumed. d. explicit cost of consumption.
When inflation rises, the nominal interest rate
a. rises, and people desire to hold more money. b. rises, and people desire to hold less money. c. falls, and people desire to hold more money. d. falls, and people desire to hold less money