You would rather be a lender when _____
A) expected inflation is high and the interest rate is high.
B) expected inflation is high and the interest rate is low.
C) expected inflation is low and the interest rate is high.
D) expected inflation is low and the interest rate is low.
E) expected inflation is zero.

Question

Quizplus · Accepted Answer

When expected inflation is low and the interest rate is high, lenders benefit because the real value of the money they get back in terms of interest and principal is higher. High interest rates mean they earn more on the loans they give out, and low inflation means the purchasing power of the money they receive back does not erode significantly over time.

You Would Rather Be a Lender When _____