After a particular loan has been paid off, neither the borrower nor the lender has lost purchasing power. Therefore, it must be true that actual inflation was

Question

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The fact that neither borrower nor lender has lost purchasing power implies that the nominal interest rate paid on the loan was equal to the rate of inflation. Therefore, the actual inflation must have been equal to the expected inflation, which was factored into the nominal interest rate. Choices A, C, and D are all incorrect because they suggest that the actual inflation was either greater than, less than, or unrelated to the expected inflation, which is not supported by the information given in the question.

After a Particular Loan Has Been Paid Off, Neither the Borrower