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7. Lynn agrees to lend Boris $10,000, which Boris will repay with interest in one year. They agree to a nominal interest rate of 8%,
7. Lynn agrees to lend Boris $10,000, which Boris will repay with interest in one year. They agree to a nominal interest rate of 8%, reflecting a real interest rate of 3% on the loan and a commonly shared expected inflation rate of 5% over the next year. a. If the inflation rate is actually 4% over the next year how does that lower-than-expected inflation rate affect Boris and Lynn? Who is better off? b. If the actual inflation rate is 7% over the next year, how does that affect Boris and Lynn? Who is better off
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