Assume That the Real Rate of Interest Is 5 Percent

question 30

Multiple Choice

Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 12 percent:

• 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.

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Definitions:

Oil Pollution

The contamination of the environment, especially aquatic ecosystems, due to the release of oil and its derivatives.

Tanker Accidents

Incidents involving large cargo ships carrying bulk liquids, such as oil, that can lead to significant environmental disasters when spills occur.

Environmental Terrorism

Acts intended to cause damage to the natural environment or to compromise public health and safety for the sake of political or social objectives.

Water Pollution

contamination of water bodies such as lakes, rivers, oceans, and groundwater, making it harmful to organisms and the environment.