If Borrowers and Lenders Agree on a Nominal Interest Rate

question 7

Multiple Choice

If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected,

• A) Neither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract.
• B) The interest rate will rise
• C) Borrowers will gain at the expense of lenders.
• D) Lenders will gain at the expense of borrowers.

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