Question 2 Imagine a loan contract with a nominal interest rate of 17 percent. The expected inflation at the time of loan origin was 8 percent, but the actual inflation is realized as 6 percent. a) What is the ex-ante real interest rate for this loan contract? b) What is the ex-post real interest rate for this loan contract? c) Who benefited from the realized inflation; the lender or the borrower? Why?

Question 2 Imagine a loan contract with a nominal interest rate of 17 percent. The expected inflation at the time of loan origin was 8 percent, but the actual inflation is realized as 6 percent. a) What is the ex-ante real interest rate for this loan contract? b) What is the ex-post real interest rate for this loan contract? c) Who benefited from the realized inflation; the lender or the borrower? Why?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

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