1.

The nominal interest rate is defined as the amount paid the borrower to the lender for using the borrowed amount for a specific period. Real interest rate calculated based on actual value (inflation-adjusted), is approximately equal to the difference between the nominal rate and expected rate of inflation in the economy.Which of the following assertions is best supported by the above information?

A. Under high inflation, the real interest rate is low and borrowers get benefited
B. Under low inflation, the real interest rate is high and borrowers get benefited
C. Under high inflation, the real interest rate is low and lenders get benefited
D. Under low inflation, the real interest rate is low and borrowers get benefited
Answer» B. Under low inflation, the real interest rate is high and borrowers get benefited


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