4. Inflation benefits people whoa. lend at fixed interest rates.c. save at fixed interest rates.borrow at variable interest ratesb. receive fixed incomes.d. borrow at fixed interest rates e.

Answered: 4. Inflation benefits people who a.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

4. Inflation benefits people who
a. lend at fixed interest rates.
c. save at fixed interest rates.
borrow at variable interest rates
b. receive fixed incomes.
d. borrow at fixed interest rates e.

Expert Solution

Step 1

We know that if inflation increases then the purchasing power of money decrease. Also, the real interest rate depends on inflation as real interest rate = nominal interest rate - inflation.

So if the inflation rate increases then the real return on a fixed interest rate investment falls.

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions