CE 05-07

Answer Questions 6 and 7 by referring to the following information about the Gross Domestic Product (GDP) of Hong Kong.

Suppose people did not expect any change in the price level. Explain whether the following persons would gain or lose when the change in the price level indicated in Table 1 occurred.

(a) A businessman who obtained a bank loan in 2001 at a fixed interest rate for 2 years. (2 marks)

(b) A businessman whose premises were let in 2001 at a fixed rent for 2 years. (2 marks)