you would rather be a lender when... a. expected inflation is high and the interest rate...
you would rather be a lender when...
a. expected inflation is high and the interest rate is high
b. expected inflation is high and the interest rate is low
c. expected inflation is low and the interest rate is high
d. expected inflation is low and the interest rate is low
e. expected inflation is zero
Homework Answers
Right Answer: (C)
Rise in inflation depreciate the value of money. Thus, lenders are at loss if inflation rises over the future. Interest rate earns money for lenders. Thus, lenders want low inflation and high interest rate.
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