If a Bank Has Already Lent Money at Fixed Interest

question 31

Multiple Choice

If a bank has already lent money at fixed interest rates,then during a period of higher-than-expected inflation,it experiences

• A)Negative real income effects.
• B)Hyperinflation.
• C)Rising real interest rates.
• D)Deflation.

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Definitions:

Perfectly Inelastic Demand Curve

A perfectly vertical demand curve; no matter what the price is, the quantity demanded remains the same.

Very Inelastic

Describes a situation in which the demand for a product or service shows little to no response to changes in price.

Market Period

An extremely short duration in which the supply of a good is fixed, unable to adjust to changes in demand, typically because the period is so brief.

Productive Capacity

The maximum output a firm or economy can produce when using all available resources efficiently.