If a Borrower and Lender Agree to an Interest Rate

question 29

Multiple Choice

If a borrower and lender agree to an interest rate on a loan when inflation is expected to be seven per cent and inflation turns out to be 10 per cent over the life of the loan, then the borrower _____ and the lender ______.

• A)gains; gains
• B)gains; loses
• C)is not affected; gains
• D)loses; gains

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Definitions:

Total Revenue

The total income generated by a firm from selling its goods or services, calculated as the price per unit times the number of units sold.

Output Units

Refers to the quantity of goods or services produced within a given time frame.

Average Total Cost

The per-unit production cost, calculated by dividing the overall production cost by the number of units produced.

Profit

The financial gain achieved when the revenue from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.