If Borrowers and Lenders Expect a Higher Rate of Inflation

question 23

Multiple Choice

If borrowers and lenders expect a higher rate of inflation,

• A) nominal interest rates will tend to fall.
• B) real interest rates will tend to fall.
• C) nominal interest rates will tend to rise.
• D) real interest rates will tend to rise.

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Definitions:

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The enhancement or diminishment of perception or judgment by the presence of a comparatively stronger or weaker stimulus.

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The branch of biology that deals with the inheritance of physical and behavioral characteristics.

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The part of the brain responsible for processing reactions to fear.

Frontal Lobe

A region of the brain involved in decision making, problem-solving, control of purposeful behaviors, consciousness, and emotions.