If Future Price Changes Were Perfectly Anticipated by Borrowers and Lenders

question 159

Multiple Choice

If future price changes were perfectly anticipated by borrowers and lenders, then _____

• A) the expected real interest rate would be higher than the actual rate.
• B) the expected real interest rate would lower than the actual rate.
• C) the real interest rate in the future would decrease by the amount of the price increase.
• D) the real interest rate in the future would increase by the amount of the price increase.
• E) the real interest rate in the future would remain unchanged.

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Definitions:

Proposition

A suggested plan or course of action.

O Proposition

In traditional logic, an O proposition is a type of categorical statement that asserts some S are not P, where S and P are the subject and predicate respectively.

Contrary

Opposite in nature, direction, or meaning; conflicting with each other.

Contraries

In the traditional square of opposition, a pair of categorical propositions that, in virtue of their logical form, could not both be true but could both be false (A and E).