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:

Variable Period Cost

Costs that vary with the level of production output or sales and are incurred during a specific accounting period, like direct materials and variable manufacturing overhead.

Delivery Charges

Fees associated with the transport and delivery of goods from the seller to the buyer.

Fixed Product Cost

Costs associated with a product that do not vary with the level of output, such as rent, depreciation, and salaries of permanent staff.

Materials Purchased

The total cost or quantity of raw materials bought by a company for use in production processes.