Answer to Question #80799 in Macroeconomics for AYANDA

Question #80799

Assume that Betty is a borrower while Tony is a money lender. Suppose Betty obtains a loan from Tony to be repaid within 12 months at a given interest rate.

Which one of the following statements is correct?

a) If the interest rate is greater than the inflation rate, then Tony will be worse off than Betty
b) If the interest rate is lower than the inflation rate, then Betty will be worse off than Tony
c) If the inflation rate is lower than the interest rate, then Tony will receive a higher compensation for his income

1) c
2) b
3) a
4) a and c
5) a and b

Expert's answer

c) If the inflation rate is lower than the interest rate, then Tony will receive a higher compensation for his income