If Actual Inflation Is Greater Than the Expected Rate of Inflation

question 32

Multiple Choice

If actual inflation is greater than the expected rate of inflation, then probably

• A)the borrowers are made better off than lenders.
• B)the borrowers are made worse off than lenders.
• C)creditors gain at the expense of borrowers.
• D)savings accounts have increased in real terms.

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Definitions:

Scrap Value

An asset's anticipated resale value once it has surpassed its period of utility.

Straight-Line Method

A method of calculating depreciation of an asset by evenly distributing its cost over the useful life of the asset.

Scrap Value

The estimated resale value of an asset at the end of its useful life, typically considered as salvage value.

Double-Declining-Balance

A method of accelerated depreciation which doubles the regular depreciation rate, reducing the value of an asset more quickly in its early years.