Assume That There Is a Fixed Rate of Interest on Contracts

question 188

Multiple Choice

Assume that there is a fixed rate of interest on contracts for borrowers and lenders.If unanticipated inflation occurs in the economy, then

• A)both lenders and borrowers benefit.
• B)both lenders and borrowers are hurt.
• C)borrowers are hurt, but lenders benefit.
• D)lenders are hurt, but borrowers benefit.

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Definitions:

Average-Total-Cost

The cost per unit of output, calculated by dividing the total cost (fixed and variable costs) by the total quantity produced.

Marginal-Cost

The expense associated with producing one additional unit of a good or service, critical for decision-making in business and economic policy.

Economies of Scale

The cost advantage achieved by an increase in production, leading to a reduction in expenses per unit due to more efficient use of resources.

Long-Run Average Cost

The per-unit cost of production in the long term, where all inputs are variable.