When Actual Inflation Is Less Than Expected Inflation

question 154

Multiple Choice

When actual inflation is less than expected inflation

• A)borrowers lose and lenders gain.
• B)borrowers gain and lenders lose.
• C)borrowers and lenders both gain.
• D)borrowers and lenders both lose.

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Definitions:

Reserve Requirements

Reserve requirements refer to the amount of funds that a bank must hold in reserve against deposits made by customers, set by central banks to ensure liquidity.

Excess Reserves

The amount of reserves that a bank holds beyond the required minimum, often held in the central bank to lend to other banks or as currency in circulation.

Required Reserves

The minimum amount of funds that a bank is required to hold in reserve against deposits, as mandated by central banking regulations.

Demand Deposits

Bank accounts that allow the holder to withdraw funds without prior notice, such as checking accounts.