Asked by Angelique Cobilla on Jun 16, 2024
The higher the expected inflation,_____.
A) the higher the nominal rate of interest that lenders require and that borrowers are willing to pay
B) the lower the nominal rate of interest that lenders require and that borrowers are willing to pay
C) the higher the nominal rate of interest that lenders require and the lower the nominal rate of interest that borrowers are willing to pay
D) the higher the real interest rate that lenders require
E) the higher the real interest rate that borrowers are willing to pay
Expected Inflation
The rate at which the general level of prices for goods and services is anticipated to rise over a specific period.
Nominal Rate
The stated or face interest rate on a loan or financial product, not adjusted for inflation, reflecting the actual rate charged by lenders to borrowers.
Interest
Payment to resource owners for the use of their capital; the dollar amount paid by borrowers to lenders.
- Master the concept of determining real and nominal interest rates and their interaction with inflation.
Learning Objectives
- Master the concept of determining real and nominal interest rates and their interaction with inflation.