You have agreed 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 3.5%. How does this affect the borrower (you) and the lender (the bank)? Who is better off?

Question

Quizplus · Accepted Answer

The Answer of You have agreed 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 3.5%. How does this affect the borrower (you) and the lender (the bank)? Who is better off?

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