A lender need not be penalized by inflation if the

A. long-term rate of inflation is less than the short-term rate of inflation.
B. short-term rate of inflation is less than the long-term rate of inflation.
C. lender correctly anticipates inflation and increases the nominal interest rate accordingly.
D. inflation is unanticipated by both borrower and lender.

C. lender correctly anticipates inflation and increases the nominal interest rate accordingly.

Economics

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