You have contracted to borrow $2,000 from the bank for one year. The nominal rate of interest is 8.5% and the real interest rate is 6%. At the end of the year, inflation was 1%. How does this affect the borrower (you) and the lender (the bank)? Who is better off?

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The Answer of You have contracted to borrow $2,000 from the bank for one year. The nominal rate of interest is 8.5% and the real interest rate is 6%. At the end of the year, inflation was 1%. How does this affect the borrower (you) and the lender (the bank)? Who is better off?

You Have Contracted to Borrow $2,000 from the Bank for One