Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 2 - The Key Principles of Economics - Exercises - 2.5 The Real-Nominal Principle - Page 46: 5.6

Answer

inflation

Work Step by Step

In a period of inflation it is assumed that salary will increase as well as prices. A higher salary will make it easier to repay the fixed amount of the loan. In a period of deflation a lower salary would make it harder to repay the fixed amount of the loan.
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