Lynn agrees to lend Boris $10,000, which Boris will repay with interest in one year. They agree to a nominal interest rate of 8%, reflecting a real interest rate of 3% on the loan and a commonly shared expected inflation rate of 5% over the next year. Required:
a. If the inflation rate is actually 4% over the next year, how does that lower-than-expected inflation rate affect Boris and Lynn? Who is better off?
b. If the actual inflation rate is 7% over the next year, how does that affect Boris and Lynn? Who is better off?

scenario: hawaii and south carolina are trading partners. hawaii has an absolute advantage in the production of both coffee and tea. the opportunity cost of producing 1 pound of tea in hawaii is 2 pounds of coffee, and the opportunity cost of producing 1 pound of tea in south carolina is 1/3 pound of coffee. which of the following statements is true? a. south carolina should specialize in the production of both tea and coffee. b. hawaii should specialize in the production of tea, whereas south carolina should specialize in the production of coffee. c. hawaii should specialize in the production of coffee, whereas south carolina should specialize in the production of tea. d. hawaii should specialize in the production of both tea and coffee.