4. If the nominal interest rate is fixed over the life of a loan, the consequences of inflation being higher than expected are that A. the real interest rate will be higher than expected, and the lender will benefit. B. the real interest rate will be lower than expected, and the lender will benefit. C. the real interest rate will be lower than expected, and the borrower will benefit. D. the real interest rate will be higher than expected, and the borrower will benefit. E. the real interest rate will remain unchanged over the life of the loan, and the lender will benefit at the expense of the borrower. 5. Under what circumstance would the nominal interest rate be positive but the real interest rate be negative? A. Expected inflation is negative. B. Expected inflation is zero. C. Expected inflation is exactly equal to the nominal interest rate. D. Expected inflation is greater than the nominal interest rate.

4. If the nominal interest rate is fixed over the life of a loan, the consequences of inflation being higher than expected are that A. the real interest rate will be higher than expected, and the lender will benefit. B. the real interest rate will be lower than expected, and the lender will benefit. C. the real interest rate will be lower than expected, and the borrower will benefit. D. the real interest rate will be higher than expected, and the borrower will benefit. E. the real interest rate will remain unchanged over the life of the loan, and the lender will benefit at the expense of the borrower. 5. Under what circumstance would the nominal interest rate be positive but the real interest rate be negative? A. Expected inflation is negative. B. Expected inflation is zero. C. Expected inflation is exactly equal to the nominal interest rate. D. Expected inflation is greater than the nominal interest rate.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 30P: A mortgage 105m is a loan that a person makes to purchase a house. Table 19.11 provides a list of...

See similar textbooks

Similar questions

What is the effect of inflation on the real value of money? a. Decrease b. Not related c. No effect d. Increase
24. If the quantity of money demanded is less than quantity of money supplied, then the interest rate will: a) change in an uncertain direction. (b) rise. (c) remain constant (d) fall.
A - 7% C D 5% 100 150 200 300 Money ($ million) 27) Refer to Figure 11.1. Suppose the Quantity of money demanded is currently at Point D. A movement to point C could be caused by A) a decrease in nominal output. C) an increase in the price level. B) an increase in the interest rate. D) a decrease in the interest rate. Interest rate (%)
What effect does inflation have on the purchasing power of money? A. It increases the purchasing power of money. B. It decreases the purchasing power of money. C. It has no effect on the purchasing power of money. D. It initially decreases but then increases the purchasing power of money over time.
Only typed answer (a) A bank is offering 5-year certificates of deposit (CDs) with a 5% interest rate. The expected inflation rate is 3%. Calculate the expected real interest rate on the CD. (Show your work.
a Imagine an economy has the following situation: Velocity of money (V) is constant, Nominal Money Supply (M) growth is 8%, Output (Y) growth is 4% and real interest rate (r) is 4%. Calculate the following: i. Nominal interest rate (i) ii. If State Bank of Pakistan (SBP) increases the money growth rate by 2 percent point per year, find Δi? iii. If the growth rate of Y decreases to 2% per annum, what will happen to the inflation rate (π)?
1.1. A decline in money purchasing power. Annual inflation was 7%. The percentage of money decreased purchasing power? Task 1.2. How will the purchasing power of money change during the year if there is a constant inflation rate of 1.5% in the quarter? 1.3. The bank pays a constant simple percentage of 10% a year. What amount should be invested in a bank account in order to accrue EUR 1000 after 4 years? 1.4. Holding period yield HPR  holding period return. The deposit certificate was purchased 7 months before the maturity of 1000 euro and sold 2 months before the maturity date of the deletion of EUR 1200. What is the profitability of this financial operation for annual fruit in the form of a rate? Objective 1.5. How much money needs to be invested today in a bank that pays 12% a year and capitalizes fruit every quarter to get £1,000 after 6 years? 1.6. The bank is offering 18% a year, inflation is 15% a year. What is the real fruit rate? 1.7. EUR 1500 is invested in the bank account.…
12. The stated annual rate of interest is referred as __________. a. Classified rate b. Marginal rate c. fractional rate d. nominal rate
Figure 2: Ms Interest Rate (%) 10% 6% 4% Md 500 800 1,000 Money ($ million) 11. Refer to Figure 2. At an interest rate of 4%, there is: a) an excess supply of money of $200. b) an excess supply of money of $600. c) an excess demand for money of $600. d) an excess demand for money of $200.
All things been equal,how can increase in interest rate affect the demand for money? (a). Demand will not be affected (b). Demand will fall (c). Demand will either increase or fall. (d). It will have no effect
Question attached’
Q 18