If a lender wants to earn a real interest rate of 3% and expects inflation to be 3%, he/she should charge a nominal interest rate that:

A. is at least 7%.
B. equals the real rate desired less expected inflation.
C. equals the real rate desired plus expected inflation.
D. is anything above 0%.


Answer: C

Economics

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Refer to the figure below. If Row Resorts offers reduced rates, then Column Cruises would receive the highest payoff if it:

A. kept its rates high. B. offered reduced its rates. C. chose either strategy because it will have the same payoff in either case. D. entered into a cartel with Row Resorts and agreed to jointly reduce rates.

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Inflation often bestows unearned income on

a. homeowners. b. lenders. c. creditors. d. fixed income receivers.

Economics