When a Lender Underestimates the Rate of Inflation

question 82

Multiple Choice

When a lender underestimates the rate of inflation,

• A)purchasing power is redistributed to the lender.
• B)purchasing power is redistributed to the borrower.
• C)the real rate of interest will be higher than expected.
• D)the nominal interest rate was set too low.

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Definitions:

Managerial Personnel

Employees who are responsible for making key decisions and overseeing the operations of a company, including executives and departmental managers.

Asset Revaluation Surplus

The increase in value of an asset, reflected on a company's financial statements, after it has been revalued to its current market value.

General Reserve

Funds set aside by a company from its profits for general unspecified future risks or obligations.