Question

Gabriela took out a five-year fixed-rate loan from a bank so that she could purchase a car. Over the life of the loan, the inflation rate was much higher than anticipated. Gabriela took out a five-year fixed-rate loan from a bank so that she could purchase a car. Over the life of the loan, the inflation rate was much higher than anticipated. How did inflation affect Gabriela or the bank?did inflation affect Gabriela or the bank? Inflation benefited the bank because the money Gabriela repaid the loan with was worth more than expected. Inflation benefited the bank because interest rates on fixed-rate loans rise at the same rate as the inflation rate. Inflation benefited Gabriela because she repaid the loan with money that was worth less than expected. Inflation benefited Gabriela because interest rates on fixed-rate loans are lowered when inflation rates rise.

Answer 1

Answer: The answer is: "Inflation benefited Gabriela because she repaid the loan with money that was worth less than expected." I took the test. I hope this helps!

Answer 2

Answer:

Inflation benefited Gabriela because she repaid the loan with money that was worth less than expected.

Explanation:

Inflation rate measures the overall increase in the CPI. The CPI is the consumer price index that measures the average price of a basket of goods compared to the price of the same basket of goods during a base year.

As the inflation rate rises, the purchasing power of the currency lowers, therefore the currency is worth less. For example, if you could buy 10 t-shirts with $100 during 2018, and the inflation rate for 2019 was 10%, you will be able to buy only  9 t-shirts with $100. That means that the inflation has decreased the real value of the currency.