Explain why you would rather be a borrower during a period of unexpected rising inflation, and a lender during a period of unexpected declining inflation
What will be an ideal response?
The nominal interest rate includes a charge to compensate the lender for the loss in the purchasing power due to inflation. If inflation unexpectedly rises, the lender does not get compensated enough for the loss in purchasing power. Likewise the borrower pays too little to compensate the lender for inflation. So it is better to be a borrower in times of unexpected rising inflation.
When inflation unexpectedly falls, then the lender gets compensated too much for inflation. The borrower likewise pays too much for inflation. So it is better to be a lender rather than a borrower during a period of unexpected declining inflation.
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A) real disposable income that is not consumed. B) a change in real disposable income that is spent. C) a change in real disposable income that is saved. D) real disposable income that is consumed.
Which of the following is not a property of assets?
A) risk B) inflation. C) liquidity D) maturity
The marginal cost curve:
a. Declines initially as output increases and rises with further increases in output b. Is equal to the average variable cost curve c. Rises initially as output increases and declines with further increases in output d. Is always constant
A manager maximizes profit when they find a level of output where marginal revenue and marginal cost are equal
Indicate whether the statement is true or false