If a Lender Expects Inflation to Be 5 Percent, and After

question 167

Multiple Choice

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

• A) The lender will receive a lower real interest rate than he expected.
• B) The loan will be repaid with dollars that are worth more than the lender expected.
• C) The nominal rate of interest can be expected to fall in the future.
• D) The lender will gain at the expense of the borrower.

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Definitions:

Ethical Egoism

A moral philosophy suggesting that actions are morally right if they benefit the self of the individual performing them.

Abraham Lincoln

The 16th President of the United States, known for leading the country during the Civil War and abolishing slavery.

Choices

The act of selecting between two or more possibilities and the mental process of judging the merits of multiple options.

Patriarchal Assumptions

Beliefs or ideas that stem from a societal system where men hold primary power and predominate in roles of political leadership, moral authority, social privilege, and property control.