If you believe that the inflation rate is likely to be high over the next ten years,you would want to
A) have a pension with raises indexed to the CPI if you were going to be retiring
B) obtain a variable rate mortgage
C) not obtain any fixed rate consumer loans
D) pay off all of your existing fixed rate loans
E) be a shareholder of a bank because their profits are going to increase dramatically

Question

Quizplus · Accepted Answer

Having a pension with raises indexed to the CPI would ensure that your income increases in line with inflation, providing protection against its effects for the long-term. Obtaining a variable rate mortgage or not obtaining fixed rate consumer loans may not be the best options as higher inflation could lead to higher interest rates, making it more expensive to pay off loans. Paying off existing fixed-rate loans might be a good idea, but it depends on the interest rates of those loans. Being a shareholder of a bank may or may not be a good option, as the impact on their profits may depend on inflation's effect on the overall economy.

If You Believe That the Inflation Rate Is Likely to Be