The nominal rate of interest tends to rise during time of inflation because
A) lenders require a higher rate in order to loan out money.
B) borrowers are willing to pay a higher rate to obtain loans.
C) loans are taken in "cheap" dollars but paid back in dollars of greater purchasing power.
D) lenders require a higher rate in order to loan out money AND borrowers are willing to pay a higher rate to obtain loans.
Correct Answer:
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