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:

Innately Satisfying

Actions or objects that are inherently pleasurable and do not require learning to be enjoyed.

Learning

The process of acquiring knowledge or skills through experience, study, or being taught.

Secondary Reinforcer

A learned stimulus that gains its reinforcing power through its association with a primary reinforcer.

Money

A medium of exchange in the form of coins and banknotes; used to facilitate transactions for goods, services, and debts.