Under what circumstances will inflation help borrowers at the expense of lenders? Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?
Only when inflation increases more than is anticipated will borrowers gain at the expense of lenders. If inflation increased less than is anticipated, lenders would actually gain at the expense of borrowers. When inflation is accurately anticipated, nominal interest rates will adjust and neither borrowers nor lenders will gain. Since there is no reason to believe decision makers will systematically underestimate or overestimate inflation, there is no reason to believe that either party will have an advantage over the other in the long run.
You might also like to view...
College students and faculty members have a more elastic demand than the general public for Apple's iMac desktop computers. From this we can conclude that
A) Apple will earn economic profits from the computers it sells to the general public but will break even on the computers it sells to college students and faculty members. B) Apple will charge college students and faculty members lower prices than it charges the general public. C) the general public will earn arbitrage profits by buying iMac desktop computers from Apple and reselling them to college students and faculty members. D) Apple will charge college students and faculty members higher prices than it charges the general public.
Which of the following countries is lacking an abundance of natural resources?
a. Australia b. Japan c. Brazil d. United States
Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases: a. a surplus of lettuce will be created
b. a shortage of lettuce will be created. c. the quantity of lettuce traded remains the same. d. the quantity of lettuce supplied will increase.
Which of the following is true of the market equilibrium in the presence of negative externalities? a. It is the intersection of the social cost curve and the demand curve
b. It is the intersection of the private cost curve and the demand curve. c. Net social welfare is maximized at the equilibrium. d. Market output is less than the socially optimal output at the equilibrium.