Final answer:
The amount borrowed in a mortgage is called the principal. Understanding the relationship between mortgage interest rates and inflation rates is key to discerning when it is advantageous to be a borrower or a lender. Studying economics is essential for managing resources, understanding market behaviors, and recognizing how it affects everyday life.
Step-by-step explanation:
In a mortgage, the amount of money borrowed is called the principal. When deciding whether it is better to be a borrower or a lender during various years, one must consider both the mortgage interest rate and the rate of inflation. Generally, it is better for borrowers when the inflation rate is higher than the mortgage interest rate because the real cost of borrowing is lower. Conversely, it is better for banks to lend when the mortgage interest rate is higher than the inflation rate, as it ensures a higher real return on the loan. Studying economics is crucial for several reasons. First, economics impacts everyday life, influencing everything from personal financial decisions to global markets. Second, it teaches individuals how to manage resources efficiently amidst scarcity. Third, economics helps us understand the behavior of producers and consumers, an essential component of market economies. Together, these aspects show how individuals and societies navigate limited resources to fulfill unlimited human wants.