Assume That There Is a fiXed Rate of Interest on Contracts

question 88

Multiple Choice

Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then

• A) both lenders and borrowers benefit.
• B) both lenders and borrowers are hurt.
• C) borrowers are hurt, but lenders benefit.
• D) lenders are hurt, but borrowers benefit.

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Definitions:

Limited Legal Liability

A legal status in which an individual's financial responsibility for a business's debts or obligations is restricted to a predetermined amount, usually limited to their investment.

Small Business

An enterprise with limited revenue and a small number of employees, as defined by government standards.

Raise Capital

The act of obtaining funds or resources for business operations, expansion, or investment.

Franchise

A business model where the brand and business system of a franchisor is licensed to a franchisee in exchange for fees or royalties.