Marta Lends Money at a Fixed Interest Rate and Then

question 117

Multiple Choice

Marta lends money at a fixed interest rate and then inflation rises more than expected.The real interest rate she earns is

• A)higher than she'd expected, and the real value of the loan rises.
• B)higher than she'd expected, and the real value of the loan falls.
• C)lower than she'd expected, and the real value of the loan rises.
• D)lower then she'd expected, and the real value of the loan falls.

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Definitions:

Subtract

The mathematical process of deducting one number from another.

Correlated

Implies a statistical relationship where two variables move together in some predictable pattern.

Error Terms

Components of a statistical model that represent the difference between observed and predicted values.

Time

The ongoing and continuous sequence of events that occur in succession, from the past through the present to the future.