Suppose that Bastila takes out a fixed-rate loan at a nominal interest rate of 7.2%. When the bank issued the loan, they expected inflation to be 2.5%. However, inflation actually turned out to be 3.4%. Which of the following statements is true? The real interest rate that Bastila must pay is 4.7% and Bastila benefitted from unexpected inflation The real interest rate that Bastila must pay is 3.8% and Bastila benefitted from unexpected inflation The real interest rate that Bastila must pay is 4.7% and the bank benefitted from unexpected inflation Th real interest rate that Bastila must pay is 3.8% and the bank benefitted from unexpected inflation
Suppose that Bastila takes out a fixed-rate loan at a nominal interest rate of 7.2%. When the bank issued the loan, they expected inflation to be 2.5%. However, inflation actually turned out to be 3.4%. Which of the following statements is true? The real interest rate that Bastila must pay is 4.7% and Bastila benefitted from unexpected inflation The real interest rate that Bastila must pay is 3.8% and Bastila benefitted from unexpected inflation The real interest rate that Bastila must pay is 4.7% and the bank benefitted from unexpected inflation Th real interest rate that Bastila must pay is 3.8% and the bank benefitted from unexpected inflation
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
Problem 13P
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Transcribed Image Text:Suppose that Bastila takes out a fixed-rate loan at a nominal interest rate of 7.2%. When the
bank issued the loan, they expected inflation to be 2.5%. However, inflation actually turned
out to be 3.4%. Which of the following statements is true?
The real interest rate that Bastila must pay is 4.7% and Bastila benefitted from unexpected inflation
The real interest rate that Bastila must pay is 3.8% and Bastila benefitted from unexpected inflation
The real interest rate that Bastila must pay is 4.7% and the bank benefitted from unexpected inflation
Th real interest rate that Bastila must pay is 3.8% and the bank benefitted from unexpected inflation
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