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.

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Definitions:

Sensory Memory

A type of memory that holds sensory information for a few seconds after the item is perceived.

Visual Search

The process of visually scanning an environment or scene to locate a particular object or feature among other distractors.

Subject's Attention

Subject's attention refers to the focus or concentration of an individual on a specific stimulus or task, determining the degree of cognitive resources allocated to processing information.

Short-Term Memory

The part of the memory system where information is stored for a short duration, typically seconds to minutes, before it is either forgotten or transferred to long-term memory.