Mortgages with variable interest rates:
A) increase the risk of expected inflation to creditors.
B) increase economic efficiency.
C) are offered at interest rates that can be adjusted to changes in inflation over time.
D) make borrowers worse off when inflation increases.
E) shift the risk of unexpected inflation from the borrower to the lender.

Question

Quizplus · Accepted Answer

Mortgages with variable interest rates are offered at interest rates that can be adjusted to changes in inflation over time. This means that when inflation increases, the interest rate also increases, which helps lenders to maintain their purchasing power. As a result, borrowers are less likely to default on their loans, making them less risky for lenders.

Mortgages with Variable Interest Rates