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.

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Definitions:

Chemical

A chemical is any basic substance that is used or produced in any chemical process, characterized by having a specific set of properties and composition.

Empiricist

An empiricist is someone who believes that knowledge comes primarily from sensory experience and observation.

Proximal Stimulus

The physical energy from a stimulus as it directly interacts with sensory receptors, such as the pattern of light hitting the retina.

Distal Stimuli

External objects and events in the environment that provide the basis for the perception of stimuli.