When lenders begin to expect higher levels of future inflation, a. Nominal interest rates today will fall as lenders try to maximize profits. b. Nominal interest rates today will rise and the price of consumption from a loan will fall. c. Nominal interest rates today will rise and the price of consumption from a loan will rise. d. There will be no change in nominal interest rates if the real rate of return remains greater than zero.
When lenders begin to expect higher levels of future inflation, a. Nominal interest rates today will fall as lenders try to maximize profits. b. Nominal interest rates today will rise and the price of consumption from a loan will fall. c. Nominal interest rates today will rise and the price of consumption from a loan will rise. d. There will be no change in nominal interest rates if the real rate of return remains greater than zero.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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When lenders begin to expect higher levels of future inflation,
a. Nominal interest rates today will fall as lenders try to maximize profits.
b. Nominal interest rates today will rise and the price of consumption from a loan will fall.
c. Nominal interest rates today will rise and the price of consumption from a loan will rise.
d. There will be no change in nominal interest rates if the real rate of return remains greater than zero.
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