Question

If the inflation rate turns out to be higher than expected, then for an existing loan with a fixed nominal rate:a. both the borrower and the lender benefit. b. the borrower benefits at the expense of the lender. c. the lender receives a higher real interest rate than they expected to. d. the borrower pays a higher real interest rate than they expected to.

Answer 1

Option ( A) both the borrower and the lender benefit

(As inflation rises, the nominal interest rate rises by the same amount, so the real interest rate remains the same.)

What is inflation?

Inflation is  rate of increase in prices over a period of time. Inflation is usually a broad measure, such as a general rise in prices or an increase in the cost of living in a country.

Are inflation good or bad?

High inflation can harmful, but low inflation can also weaken an economy. If the economy struggles and inflation is too low, the Fed will take the opposite approach, cutting interest rates or buying assets to increase cash in circulation.

What occurs if inflation is high?

Rising inflation reduces the purchasing power of savings over time, discouraging savings. This outlook can spur consumer spending and business investment. As a result, when inflation rises, unemployment is often the first to fall.

To know more about Inflation visit here:

https://brainly.com/question/29617519

#SPJ4