Assume That the Real Rate of Interest Is 5 Per

question 76

Multiple Choice

Assume that the real rate of interest is 5 per cent and a lender charges a nominal interest rate of 15 per cent.If a borrower expects that the rate of inflation next year will be 10 per cent and the actual rate of inflation next year is 12 per cent:

• A)neither the borrower nor the lender benefits from inflation.
• B)both the borrower and the lender lose from inflation.
• C)the borrower benefits from inflation, while the lender loses from inflation.
• D)the lender benefits from inflation, while the borrower loses from inflation.
• E)it is not possible to determine who gains or loses.

---

Definitions:

Ego Depletion

A theory suggesting that self-control or willpower draws upon a limited pool of mental resources that can be temporarily exhausted.

Cognitive Control

The ability to regulate one’s thoughts, behaviors, and emotions to achieve goals.

Glucose

A simple sugar that is an important energy source in living organisms and is a component of many carbohydrates.

Glucose

A simple sugar that is an important source of energy in the body and a key player in metabolism.