Essay
In January of this year, you take a loan of $15,000, and the bank (expecting an inflation rate of 2%) asks you to pay an interest rate of 7% per year.
(a) Suppose that the actual inflation rate turns out to be 4%. Who gains and who loses?
(b) Suppose that the actual inflation rate turns out to be 1%. Who gains and who loses?
Correct Answer:
Verified
Correct Answer:
Verified
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