If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected ?
Correct answer: D. lenders will gain at the expense of borrowers
- A. neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract
- B. None of these answers
- C. borrowers will gain at the expense of lenders
- D. lenders will gain at the expense of borrowers
Explanation
With the nominal rate fixed, lower-than-expected inflation makes the real interest rate higher than anticipated. Borrowers must repay money with greater purchasing power, so lenders gain at borrowers’ expense.
Last updated
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,462 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
1. The most widely traded currency in the foreign exchange market is the ?
85% of the world's population lives in developing countries and receives about _____ of the world's income?
A 44-nation survey regrading religions found that_________________?
A bank has excess reserves to lend but is unable to find anyone to borrow the money This will _________ the size of the money multiplier?
A capital account surplus might be expected to cause a current account deficit because the associated ?