Suppose the fixed interest rate on a loan is 5.75% and the rate of inflation is expected to be 4.25%. the real interest rate is 1.5%. suppose now that instead of 4.25%, the inflation rate unexpectedly reaches 5.5%. who gains and who loses from this unanticipated inflation?
(mark all that apply.)
a. lenders gain from a lower real interest rate.
b. borrowers gain from a lower real interest rate.
c. borrowers lose from a lower real interest rate.
d. lenders lose from a lower real interest rate.
Answers: 1
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Suppose the fixed interest rate on a loan is 5.75% and the rate of inflation is expected to be 4.25%...
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