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:

Personality Test

An assessment tool designed to measure and evaluate a person's character or psychological makeup.

Reliability

In measurement, the tendency of an instrument to provide the same comparative information on repeated occasions.

Generalizability

The degree to which a measurement can be found under diverse circumstances, such as time, context, participant population, and so on. In modern psychometrics, this term includes both reliability and validity.

Reliability

In statistics and psychometrics, it refers to the consistency and dependability of a test, measurement, or evaluation over time.