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.
You might also like to view...
Both Horwitz (1973) and Scheiber (1975) emphasize the restraining effects of judicial formalism on U.S. economic growth in the antebellum period
Indicate whether the statement is true or false
A tax for which the average tax rate decreases with income is defined as a
a. regressive tax. b. proportional tax. c. neutral tax. d. progressive tax.
Which types of expenditures (From the GDP formula) are entirely autonomous, according to Keynes?
What will happen if a country uses money creation to finance a large and expanding national debt?
a. Real output and employment will grow rapidly. b. Nominal interest rates will fall. c. The foreign exchange value of the currency will increase. d. The rate of inflation will rise.