Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 10 percent,
a. the lender benefits from inflation, while the borrower loses from inflation.
b. the borrower benefits from inflation, while the lender loses from inflation.
c. neither the borrower nor the lender benefits from inflation.
d. both the borrower and the lender lose from inflation.
c
Economics
You might also like to view...
An economic profit for a self-employed entrepreneur is
A) an opportunity cost. B) the same as the normal profit. C) a profit over and above opportunity cost. D) None of the above answers is correct.
Economics
For which of the following is there no such thing as a "price?"
a. labor b. land c. entrepreneurship d. none of the above
Economics