A.Suppose that human being mean inflation to be 3 percent yet that, in reality, prices increase by 5 percent. Describe how this all of a sudden high inflation would certainly assist or hurt the following:

a. the government

b. a homeowner via a fixed-rate mortgage

c. a union worker in the second year of a labor contract

d. a college that has invested some of its endowment in federal government bonds

B. Exordinary whether the following statements are true, false, or unparticular.

You are watching: Suppose that people expect inflation to equal 3 percent, but in fact, prices rise by 5 percent.

a. “Inflation harms borrowers and also helps lenders, because borrowers have to pay a higher price of


b. “If prices readjust in a method that leaves the overall price level unchanged, then no one is made much better or worse off.”

c. “Inflation does not mitigate the purchasing power of many employees.


Mar 07 2021 03:13 AM

1 Approved Answer


Saloni panswered on March 09, 2021
5Ratings,(19 Votes)
A.a. This unmeant rise of inflation is excellent for the Government bereason it gives more taxes revenue and also its debt gets reduced in actual value. On the other side, currently the federal government has to carry a better amount of...
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