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Consider a scenario where a firm has taken out a loan to finance the purchase on robots that it will use in production. Assume that
Consider a scenario where a firm has taken out a loan to finance the purchase on robots that it will use in production. Assume that the nominal interest rate at the time the loan was created is 8% and the expected rate of inflation was 5%. If inflation ends up running higher than expected at 9% the firm will make a loss and would have been better off not undertaking the investment in robots. Sum it up in 100 words.
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