Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?
A. Only the borrowers benefit.
B. Only the lenders benefit.
C. Both borrowers and lenders benefit.
D. Neither borrowers nor lenders.
Answer: A
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Another name for stockholder wealth maximization is
A) profit maximization. B) maximization of earnings per share. C) maximization of the value of the common stock. D) maximization of cash flows.
The result of the balanced budget multiplier is that aggregate demand changes by the amount of the change in:
a. government spending. b. tax revenue. c. government spending plus tax revenue. d. government spending minus tax revenue.
Carlos and Darla are representative individuals playing the dictator game. Carlos is assigned the role of dictator and given $20 to split between the two of them. Based on previous experiments with this game by behavioral economists, about a third of the
time we would expect: A. Carlos to keep all of the money for himself. B. Carlos to give all of the money to Darla. C. Carlos to split the money evenly with Darla. D. Carlos to split the money, keeping a little more than half for himself.