Inflation Affects Borrowers and Lenders Differently

question 168

Multiple Choice

Inflation affects borrowers and lenders differently.After signing a contract with a fixed nominal interest rate, it can be expected that

• A)borrowers will hope that prices fall.
• B)lenders will hope that prices rise.
• C)lenders will hope that the purchasing power of money will fall.
• D)borrowers will hope that prices rise.

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Definitions:

Rational Decisions

Choices made based on logical reasoning and objective analysis rather than emotion or personal preference.

Random Assignment

A procedure in experimental design that allocates participants randomly to either the control or experimental group, ensuring that each participant has an equal chance of being assigned to any group.

Experimental Research

Research designed to discover causal relationships between various factors.

Experimental Research

A systematic and scientific approach to research in which the researcher manipulates one or more variables to determine their effect on a certain outcome.