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You Borrow Money to Buy a House in 2006 at a Fixed

Question 112

Multiple Choice

You borrow money to buy a house in 2006 at a fixed interest rate of 6.5%. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?


A) good news, because it makes the real value of your mortgage payments decrease
B) bad news, because it makes the nominal value of your mortgage payments increase
C) bad news, because it makes the real value of your mortgage payments increase
D) bad news, because inflation hurts everyone

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