After a particular loan has been paid off,neither the borrower nor the lender has lost purchasing power.Therefore,it must be t that actual inflation was
A) greater than expected inflation.
B) equal to expected inflation.
C) less than expected inflation.
D) greater than the nominal rate of interest.

Question

Quizplus · Accepted Answer

If the loan has been paid off and both the borrower and lender have the same purchasing power as before, then the nominal interest rate paid on the loan was equal to the expected inflation rate. Therefore, the actual inflation rate must also have been equal to the expected inflation rate.

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