If Actual Inflation Is Less Than the Expected Rate of Inflation

question 73

Multiple Choice

If actual inflation is less than the expected rate of inflation, then probably

• A)the borrower gains at the expense of the lender.
• B)neither the borrower nor the lender gains.
• C)the lender gains at the expense of the borrower.
• D)the purchasing power of the borrower is increased.

---

Definitions:

Lease Classification

The process of categorizing leases as either operating leases or finance (capital) leases based on criteria that affect the lessee's financial statements.

Leveraged Lease

A financing arrangement where the lessor uses borrowed funds to acquire an asset which is then leased to a lessee, allowing for tax benefits and risk distribution.

Sales-type Lease

A lease agreement where the lessor effectively sells the asset to the lessee, recognizing profit or loss at the lease's inception.

Lessor Classification

Refers to criteria used by lessors to determine whether a lease should be classified as a finance lease or an operating lease.