+1 vote

Nominal interest rate is defined as the amount paid by the borrower to the lender for using the borrowed amount for a specific period of time. Real interest rate calculated on the basis of actual value (inflation-adjusted), is approximately equal to the difference between nominal rate and expected rate of inflation in the economy.

Which of the following assertions is best supported by the above information?

1. Under high inflation, real interest rate is low and borrowers get benefited
2. Under low inflation, real interest rate is high and borrowers get benefited
3. Under high inflation, real interest rate is low and lenders get benefited
4. Under low inflation, real interest rate is low and borrowers get benefited

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