Suppose That at the Beginning of a Loan Contract,the Real

question 27

Multiple Choice

Suppose that at the beginning of a loan contract,the real interest rate is 4% and expected inflation is currently 6%.If actual inflation turns out to be 7% over the loan contract period,then

• A)borrowers gain 1% of the loan value.
• B)lenders gain 1% of the loan value.
• C)borrowers lose 3% of the loan value.
• D)lenders gain 3% of the loan value.

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Definitions:

Positive

Characterized by the presence or possession of features or qualities rather than their absence.

Negative

Characterized by a lack of positive qualities, often associated with harmful or undesirable effects.

External Locus

The belief that outcomes in one's life are determined by external forces or circumstances beyond personal control.

Positive Attitude

A position resulting from healthy self-esteem, optimism, extraversion, and personal control.