# [Solved] In Which of the Following Situations Would You Prefer to Be

## In which of the following situations would you prefer to be the borrower?

A)The interest rate is 9 percent and the expected inflation rate is 7 percent.

B)The interest rate is 4 percent and the expected inflation rate is 1 percent.

C)The interest rate is 13 percent and the expected inflation rate is 15 percent.

D)The interest rate is 25 percent and the expected inflation rate is 50 percent.

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- Q85: When the ________ interest rate is low,there are greater incentives to ________ and fewer incentives to ________. A)nominal;lend;borrow B)real;lend;borrow C)real;borrow;lend D)market;lend;borrow
- Q86: The interest rate that describes how well a lender has done in real terms after the fact is called the A)ex post real interest rate. B)ex ante real interest rate. C)ex post nominal interest rate. D)ex ante nominal interest rate.
- Q87: The ________ states that the nominal interest rate equals the real interest rate plus the expected rate of inflation. A)Fisher equation B)Keynesian equation C)Monetarist equation D)Marshall equation
- Q88: If the nominal rate of interest is 2 percent,and the expected inflation rate is -10 percent,the real rate of interest is A)2 percent. B)8 percent. C)10 percent. D)12 percent.
- Q89: In which of the following situations would you prefer to be the lender? A)The interest rate is 9 percent and the expected inflation rate is 7 percent. B)The interest rate is 4 percent and the expected inflation rate is 1 percent. C)The interest rate is 13 percent and the expected inflation rate is 15 percent. D)The interest rate is 25 percent and the expected inflation rate is 50 percent.
- Q91: If you expect the inflation rate to be 15 percent next year and a one-year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is A)7 percent. B)22 percent. C)-15 percent. D)-8 percent.
- Q92: If you expect the inflation rate to be 12 percent next year and a one-year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is A)-5 percent. B)-2 percent. C)2 percent. D)12 percent.
- Q93: If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent,then the real interest rate on this bond is A)-3 percent. B)-2 percent. C)3 percent. D)7 percent.
- Q94: In the United States during the late 1970s,the nominal interest rates were quite high,but the real interest rates were negative. From the Fisher equation,we can conclude that expected inflation in the United States during this period was A)irrelevant. B)low. C)negative. D)high.
- Q95: The interest rate on Treasury Inflation Indexed Securities can be roughly interpreted as A)the real interest rate. B)the nominal interest rate. C)the rate of inflation. D)the rate of deflation.

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