You would rather be a borrower when the _____
A) interest rate is 10 percent and expected inflation is 2 percent.
B) interest rate is 5 percent and expected inflation is minus 2 percent.
C) interest rate is 9 percent and expected inflation is 7 percent.
D) interest rate is 8 percent and expected inflation is minus 3 percent.
E) interest rate is 12 percent and expected inflation is 5 percent.

Question

Quizplus · Accepted Answer

In option C, the real interest rate (interest rate - inflation) is 2 percent, which is the lowest among the options. This means the cost of borrowing is lower relative to inflation, making it the most favorable scenario for a borrower.

You Would Rather Be a Borrower When the _____