When Actual Inflation Exceeds Expected Inflation

question 39

Multiple Choice

When actual inflation exceeds expected inflation,

• A) short-term borrowers benefit more than long-term borrowers.
• B) long-term lenders benefit more than short-term lenders.
• C) long-term borrowers benefit more than short-term borrowers.
• D) there is no effect on borrowers or lenders.

---

Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production supplies.

Fixed Costs

Expenses that do not change with the level of output or activity, such as rent, salaries, and insurance premiums.

Break-Even

The point at which total revenues equal total costs, resulting in neither profit nor loss.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in neither profit nor loss.