Question
Suppose that last year $\$ 30$ billion in new loans were extended by banks while $\$ 50$ billion in old loans were paid off by borrowers. What happened to the money supply? a. Increased.b. Decreased.c. Stayed the same.
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The money supply refers to the total amount of money available in an economy at a particular point in time. This includes various forms of money like cash, coins, and balances held in checking and savings accounts. Show more…
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Suppose that last year $\$ 30$ billion in new loans were extended by banks while $\$ 50$ billion in old loans were paid off by borrowers. What happened to the money supply? a. Increased. b. Decreased. c. Stayed the same.
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. a. Is the real interest rate on this loan higher or lower than expected? b. Does the lender gain or lose from this unexpectedly high inflation? Does the borrower gain or lose? c. Inflation during the 1970s was much higher than most people had expected when the decade began. How did this affect homeowners who obtained fixed-rate mortgages during the 1960s? How did it affect the banks that lent the money?
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. a. Is the real interest rate on this loan higher or lower than expected? b. Does the lender gain or lose from this unexpectedly high inflation? Does the borrower gain or lose? c. Inflation during the 1970 s was much higher than most people had expected when the decade began. How did this unexpectedly high inflation affect homeowners who obtained fixed-rate mortgages during the 1960 s? How did it affect the banks that lent the money?
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