Suppose you lent money to a friend a few years ago at a nominal interest rate of 6%. At the time othe loan, you expected the annual inflation rate to be 2%, but the actual annual inflation rate was 1.2%. When the loan originated, you expected to earn a real return of but due to unexpected disinflation, you earned an actual real return of A. 2%; 1.2% B. 4.8%; 6% C. 6%; 4.8% D. 4%; 4.8%

Suppose you lent money to a friend a few years ago at a nominal interest rate of 6%. At the time othe loan, you expected the annual inflation rate to be 2%, but the actual annual inflation rate was 1.2%. When the loan originated, you expected to earn a real return of but due to unexpected disinflation, you earned an actual real return of A. 2%; 1.2% B. 4.8%; 6% C. 6%; 4.8% D. 4%; 4.8%

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 37P: Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time...

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