James took out a fixed-interest-rate loan when the CPI was 200. He expected the CPI to increase to 206 but it actually increased to 204. The real interest rate he paid is
A) higher than he had expected, and the real value of the loan is higher than he had expected.
B) higher than he had expected, and the real value of the loan is lower than he had expected.
C) lower than he had expected, and the real value of the loan is higher than he had expected.
D) lower then he had expected, and the real value of the loan is lower than he had expected.
Correct Answer:
Verified
Q177: The principle of monetary neutrality implies that
Q178: If M = 3,500, P = 4.5,
Q179: According to the quantity equation, the price
Q180: Based on the quantity equation, if Y
Q181: The costs of changing price tags and
Q183: The Fisher effect is crucial for understanding
Q184: Wealth is redistributed from creditors to debtors
Q185: The shoeleather cost of inflation refers to
Q186: In order to maintain stable prices, a
Q187: Assuming the Fisher Effect holds, and given
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents