Use the Following to Answer Questions: Table: Anticipating Inflation -(Table: Anticipating Inflation) Using the Inflation Data in the Table

question 79

Multiple Choice

Use the following to answer questions: Table: Anticipating Inflation $$\begin{array} { l c c } \hline \text { Year } & \text { Predicted Inflation Rate } & \text { Actual Inflation Rate } \\\hline 2000 & 3 \% & 3 \% \\2001 & 3 \% & 2 \% \\2002 & 7 \% & 9 \% \\2003 & 5 \% & 4 \% \\2004 & 4 \% & 7 \% \\\hline\end{array}$$
-(Table: Anticipating Inflation) Using the inflation data in the table above, assume that all loan contracts have fixed nominal interest rates of 10% and mature after 1 year. Which year did borrowers gain relative to lenders?

• A) 2000
• B) 2001
• C) 2002
• D) 2003

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Definitions:

Isoquants

Curves on a graph that represent different combinations of factors of production that yield the same level of output.

Factors of Production

The inputs used in the production of goods or services in the process of creating economic value, typically including land, labor, capital, and entrepreneurship.

Isoquant

An isoquant is a curve that represents all the combinations of inputs that produce the same level of output in the production process.

Slope

In mathematics and economics, it is the measure of the steepness or incline of a line, often representing the rate of change between two variables.