Lenders will be willing to reduce the nominal interest rates on loans if the expected inﬂation
increases.

Question

Quizplus · Accepted Answer

Lenders will be unwilling to reduce the nominal interest rates on loans if the expected inflation increases because that would mean a decrease in the real interest rate they would receive on the loan. Lenders will actually increase the nominal interest rates in response to higher expected inflation.

Lenders Will Be Willing to Reduce the Nominal Interest Rates