1. Unexpectedly high inflation the real interest rate and hurts .

a. raises, lenders

b. raises, borrowers

c. lowers, lenders

d. lowers, borrowers

2. Ignoring taxes, an increase in expected inflation

a. raises the nominal interest rate

b. lowers the nominal interest rate

c. raises the real interest rate

d. lowers the real interest rate

3. An expected increase in the inflation rate

a. raises the after-tax real interest rate and encourages saving

b. lowers the after-tax real interest rate and discourages saving

c. leaves the after-tax real interest rate and savings unchanged

d. leaves the after-tax real interest rate unchanged but discourages savings

4. If i = 6%, E = = 3%, then the real interest rate is

a. -3%

b. 0%

c. 3%

d. 6%

5. If i = 6%, E = = 3%, and the income tax rate is 1/3 then the after-tax real interest rate is

a. -1%

b. 1%

c. 2%

d. 5%