What happens over time to the real cost of purchasing a home if the mortgage payments are fixed in nominal terms and inflation is in existence?
A)the real cost is constant.
B)the real cost is increasing.
C)the real cost is decreasing.
D)the price index must be known to answer this question.

Question

Quizplus · Accepted Answer

When mortgage payments are fixed in nominal terms and inflation exists, the real cost of purchasing a home decreases over time. This is because the value of money decreases with inflation, making the fixed nominal payments effectively cheaper in real terms as time goes on.

What Happens Over Time to the Real Cost of Purchasing