You borrow money to buy a house in 2006 at a fixed interest rate of 6.5%.By 2009,the inflation rate has risen to 8.5%.Considering only your mortgage,is inflation good news or bad news for you?
A)bad news,because inflation hurts everyone
B)bad news,because it makes the real value of your mortgage payments increase
C)good news,because it makes the real value of your mortgage payments decrease
D)bad news,because it makes the nominal value of your mortgage payments increase

Question

Quizplus · Accepted Answer

Inflation reduces the real value of fixed payments, so your mortgage payments become cheaper in real terms.

You Borrow Money to Buy a House in 2006 at a Fixed