Describes what happens with nominal assets during inflation

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Reference no: EM131940438

1. Which of the following is not true? "Unanticipated inflation ......"

-hurts homeowners with a fixed rate mortgage

-hurts lenders

-benefits real asset holders

-hurts nominal asset holders

2. Suppose you sign a contract with your bank to borrow $50,000 for ten years at a fixed interest rate of 6%. If, over the years of the loan, the rate of inflation falls, the real interest rate on that loan will

- Go up

-Go down

-stay the same

-There is not enough information to determine the direction of the real interest rate in this case

3. If you hold your savings in the form of a nominal asset (other than cash), you are a:

- Speculator

-Borrower

-Lender

-Leveraged investor in real assets

4. Which of the following best describes what happens with nominal assets during inflation?

- The real value of a nominal asset will tend to rise during inflation, sometimes by a rate greater than inflation.

- The real value of a nominal asset will fall.

- The market value of a nominal asset will rise by an amount that is always precisely equal to the rate of inflation

- The real value of the nominal asset will remain the same during inflation.

Reference no: EM131940438

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