If You Agree to a Long-Term Loan at a Specified

question 85

Multiple Choice

If you agree to a long-term loan at a specified nominal rate of interest and inflation turns out to be higher than was anticipated,

• A) the nominal rate of interest falls.
• B) the nominal rate of interest rises.
• C) the real rate of interest falls.
• D) the real rate of interest rises.

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Definitions:

Marginal Utility

Marginal Utility is the added satisfaction or benefit a consumer receives from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle that the utility or satisfaction gained by consuming each additional unit of a good or service decreases as more of that good or service is consumed.

Marginal Utility

The extra pleasure or benefit derived from consuming an additional unit of a product or service.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good that consumers are willing and able to purchase at various prices.