You Borrow $10,000 Today at a Nominal Rate of 5%;

question 61

Multiple Choice

You borrow $10,000 today at a nominal rate of 5%; inflation for the past 10 years has been exactly 2%.Today,inflation instantly rises to 7% and stays that way for the duration of your loan.Based on the above information,ceteris paribus (all else equal) ,today:

• A) the real rate of interest on your loan is 14%.
• B) the real rate of interest on your loan was previously 10% and is now 35%.
• C) the real rate of interest on your loan is now -2%.
• D) you will pay the lender back exactly $9,500.
• E) you will pay the lender back exactly $10,700.

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Definitions:

Helplessness

A psychological state in which an individual feels unable to control or escape from their situation, often leading to decreased motivation and depression.

Manic Phase

A period in bipolar disorder characterized by elevated mood, increased activity or energy levels, and often impaired judgment.

Bipolar Disorder

A psychological disorder marked by severe fluctuations in mood, encompassing intense highs (mania or hypomania) and significant lows (depression).

Neurotransmitter

A chemical substance that transmits nerve impulses across a synapse from one nerve cell to another.