Suppose That Anticipated Inflation Is 4% for the Coming Year,with

question 2

Multiple Choice

Suppose that anticipated inflation is 4% for the coming year,with loan contracts set at 7% in the expectation of a 3% return after inflation.If the actual inflation rate at the end of the year is 2%:

• A) creditors gain at debtors' expense.
• B) people on a fixed income see the purchasing power of their incomes rising.
• C) debtors gain at creditors' expense.
• D) there's a redistribution of income from creditors to debtors.

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Definitions:

Drawee

The party, usually a bank, required to pay the specified amount on a draft or check.

Drawer

The person or entity that writes and signs a check or draft, instructing the drawee (usually a bank) to pay the specified sum to the payee.

Payee

The individual or entity entitled to receive payment in a transaction.

Electronic Banking

The use of computer networks and digital technologies to conduct financial transactions and access banking services.