If Borrowers and Lenders Expect a Higher Rate of Inflation

question 58

Multiple Choice

If borrowers and lenders expect a higher rate of inflation,

• A)nominal interest rates should decrease.
• B)nominal interest rates should remain constant.
• C)nominal interest rates should increase.
• D)real interest rates should increase.

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Definitions:

Incorporator

The individual or entity that files the articles of incorporation, thus legally forming a corporation.

Preincorporation Contracts

Agreements entered into on behalf of a corporation not yet formed, which the corporation may later ratify or reject.

Promoter

A person who incorporates a business, organizes its initial management, and raises its initial capital.

Preincorporation Contract

An agreement made by the incorporators or promoters of a company on behalf of the company before it has been legally formed.