Use the following to answer questions: Table: Anticipating Inflation $$\begin{array} { l c c }
\hline \text { Year } & \text { Predicted Inflation Rate } & \text { Actual Inflation Rate } \
\hline 2000 & 3 \% & 3 \% \
2001 & 3 \% & 2 \% \
2002 & 7 \% & 9 \% \
2003 & 5 \% & 4 \% \
2004 & 4 \% & 7 \% \
\hline
\end{array}$$
-(Table: Anticipating Inflation) Using the inflation data in the table above, assume that all loan contracts have fixed nominal interest rates of 10% and mature after 1 year. In which year did lenders receive exactly the amount of real interest they expected?
A) 2000
B) 2002
C) 2003
D) 2004

Question

Use the following to answer questions: Table: Anticipating Inflation $$\begin{array} { l c c } 
\hline \text { Year } & \text { Predicted Inflation Rate } & \text { Actual Inflation Rate } \
\hline 2000 & 3 \% & 3 \% \
2001 & 3 \% & 2 \% \
2002 & 7 \% & 9 \% \
2003 & 5 \% & 4 \% \
2004 & 4 \% & 7 \% \
\hline
\end{array}$$
-(Table: Anticipating Inflation) Using the inflation data in the table above, assume that all loan contracts have fixed nominal interest rates of 10% and mature after 1 year. In which year did lenders receive exactly the amount of real interest they expected?
A) 2000
B) 2002
C) 2003
D) 2004

Quizplus · Accepted Answer

In 2000, the predicted inflation rate was 3% and the actual inflation rate was also 3%. This means that the real interest rate was 10% - 3% = 7%, which is exactly what lenders expected.

Use the Following to Answer Questions: Table: Anticipating Inflation -(Table: Anticipating Inflation) Using the Inflation Data in the Table