A Lender Need Not Be Penalized by Inflation If the

Multiple Choice

A lender need not be penalized by inflation if the

A) long-term rate of inflation is less than the short-term rate of inflation.
B) short-term rate of inflation is less than the long-term rate of inflation.
C) lender correctly anticipates inflation and increases the nominal interest rate accordingly.
D) inflation is unanticipated by both borrower and lender.