Suppose That You Borrow $5,000 from the Bank to Purchase

question 280

Multiple Choice

Suppose that you borrow $5,000 from the bank to purchase some land and you agree to pay 9 percent interest on the loan. If the loan must be repaid in 12 months and the inflation rate is 13 percent during the year, then

• A)you will repay the bank with dollars with more purchasing power than you initially borrowed.
• B)you will repay the bank with fewer dollars than the bank initially loaned you.
• C)you will repay the bank with dollars with less purchasing power than it initially loaned you.
• D)the bank will receive fewer dollars, because of inflation, than it had initially expected to receive.

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Definitions:

Negotiating Tactics

Strategies or methods used to gain an advantageous position during discussions for agreements or disputes.

Personalistic Ethics

A moral framework that emphasizes the importance of human individuals and their values and relationships over abstract principles.

Greatest Good

A principle aimed at achieving the maximum positive impact or benefit for the greatest number of people.

Rules

Guidelines or instructions that dictate how something should be done or what is permissible.