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?
- Under high inflation, real interest rate is low and borrowers get benefited
- Under low inflation, real interest rate is high and borrowers get benefited
- Under high inflation, real interest rate is low and lenders get benefited
- Under low inflation, real interest rate is low and borrowers get benefited