James Took Out a Fixed-Interest-Rate Loan When the CPI Was

question 49

Multiple Choice

James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is

• A)higher than he had expected, and the real value of the loan is higher than he had expected.
• B)higher than he had expected, and the real value of the loan is lower than he had expected.
• C)lower than he had expected, and the real value of the loan is higher than he had expected.
• D)lower then he had expected, and the real value of the loan is lower than he had expected.

Appreciate the role of cultural influences and individual differences in food selection and eating habits.

Understand how achievement motivation influences educational and career success.

Recognize the importance of grit and self-efficacy in long-term goal achievement.

Understand the psychological need to belong and its implications for behavior.

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Definitions:

Demand for Money

The desire to hold cash or easily liquidated financial instruments for transactions, precautionary, or speculative motives.

Opportunity Cost

The cost attributed to the refusal of the immediately lesser appealing option during decision-making.

Target Rate

A target interest rate set by the central bank in a country that guides monetary policy decisions, aiming to control inflation, encourage borrowing, or stabilize the economy.

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.