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elbthwtkns01 elbthwtkns01
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5 years ago

Question 1.

Drew wants to borrow $500 from Bob. Bob wants to make 4% real return on his money, so they both agree on an 4% interest rate paid next year. Both don't anticipate the -5% inflation next year. In this case



▸ Drew will pay an 4% real interest rate.

▸ Bob is better off.

▸ Drew will pay an 13% nominal interest rate.

▸ All of these.

Question 2.

Julio borrows $250 from Ricky. Ricky wants to make a 5% real return on his money, so they both agree on a 5% interest rate paid next year. Both don't anticipate the 5% inflation next year. In this case



▸ Ricky is better off.

▸ Julio will pay $15 a year from now on.

▸ Julio is better off.

▸ Ricky will receive more than 5% of real rate of return a year from now.
Textbook 
Principles of Economics

Principles of Economics


Edition: 12th
Authors:
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Brittany08196Brittany08196
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