Imagine That You Borrow $5,000 for One Year and at the End

Suppose you borrow $1,000 at an interest rate of 12 percent.If the expected real interest rate is 5 percent,then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation A) equal to 0 percent. B) greater than 7 percent. C) equal to 7 percent. D) less than 7 percent.

Suppose you lend $1,000 at an interest rate of 10 percent over the next year.If the expected real interest rate at the beginning of the loan contract is 4 percent,then what rate of inflation over the upcoming year would be most beneficial to you as the lender? An inflation rate A) equal to 0 percent. B) greater than 6 percent. C) equal to 6 percent. D) equal to 4 percent.