Julie borrows $100 from her friend Samir at a nominal interest rate of 10%. Both expect an
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Question:
Julie borrows $100 from her friend Samir at a nominal interest rate of 10%. Both expect an inflation rate of 5%, and the actual inflation rate is 10%. Which of the following statements is correct?
a) Inflation causes a redistribution effect from Julie to Samir.
b) There is no redistribution since the real interest rate is positive.
c) Inflation causes a redistributive effect from Samir to Julie
d) There is no redistributive effect since the real interest rate is 0%.
Related Book For
Engineering Economic Analysis
ISBN: 9780195168075
9th Edition
Authors: Donald Newnan, Ted Eschanbach, Jerome Lavelle
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