If Inflation Is Lower Than What Was Expected

question 23

Multiple Choice

If inflation is lower than what was expected,

• A)creditors receive a lower real interest rate than they had anticipated.
• B)creditors pay a lower real interest rate than they had anticipated.
• C)debtors receive a higher real interest rate than they had anticipated.
• D)debtors pay a higher real interest rate than they had anticipated.

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Definitions:

Price Increase

A rise in the cost of goods or services in an economy, often measured by indices such as the Consumer Price Index (CPI).

Loss of Income

Refers to a situation where an individual or entity experiences a reduction in earnings or revenue.

Utility Function

A representation in economics that measures preferences over a set of goods and services, often in order to derive an individual's optimal choice under constraints.

Income Bundle

A combination of goods and services that a consumer can purchase with their available income.