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:

Motivating Force

An internal or external stimulus that prompts a person towards action or to achieve a goal.

Survival Instincts

Innate behaviors and reactions in organisms aimed at preserving life in the face of threats or dangerous situations.

Sexual Instincts

Fundamental driving forces in Freudian psychology associated with survival and reproduction, influencing human behavior by seeking pleasure and avoiding pain.

Modern Psychology

The scientific study of the mind and behavior, incorporating contemporary theories and methodologies to understand psychological phenomena.