If inflation is both high and volatile:

A. nominal interest rates will also be high and volatile since real interest rates are stable.
B. lenders may be unwilling to lend out of fear of unexpected increases in inflation.
C. real interest rates will also be high and volatile since nominal interest rates are stable.
D. borrowers may be unwilling to borrow out of fear of unexpected increases in inflation.


Answer: B. lenders may be unwilling to lend out of fear of unexpected increases in inflation.

Economics

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