With No Inflation, a Bank Would Be Willing to Lend

question 49

Multiple Choice

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6%. But if the rate of inflation was anticipated to be 4%, the bank would most likely charge the firm an annual interest rate of:

• A) 2 percent
• B) 4 percent
• C) 6 percent
• D) 10 percent

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Definitions:

Crime

An act prohibited by the state; a public wrong.

Exclusive Dealing

A contractual agreement where one party agrees to buy goods exclusively from another, often restricting competition.

Distributor

A person or company that is responsible for supplying goods to retailers or directly to customers.

Manufacturer

A person or company that makes goods for sale, especially on a large scale.