When the Inflation Rate Ends Up Being Lower Than Expected

question 8

Multiple Choice

When the inflation rate ends up being lower than expected,

• A) Everyone benefits because money is cheaper.
• B) Everyone benefits because prices do not increase.
• C) Lenders of fixed rate mortgages generally benefit because they will make higher profits than they had calculated.
• D) Borrowers with fixed rate loans will benefit because their purchasing power will not decline as much.

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Definitions:

Common Stock

A form of corporate equity ownership, a type of security representing an ownership stake in a corporation.

Market Price

The immediate rate at which assets or services are traded in the open market.

Par Common Stock

The nominal or face value of a share of common stock, as stated in the corporate charter.

Fair Market

The price at which a willing buyer and seller would agree to transact in an open and unrestricted market.