4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups.a homeowner with a fixed-rate mortgage.a union worker with a fixed labor contracta company that has invested some of its endowment in a government bonds which pay a fixed rate of return.5. Indicate how each of the following events would affect the aggregate demand AD curve: a short-run decrease in the price levelan increase in consumer confidence on the price level and real GDPan increase in government purchases

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Answered: 4. Suppose that people expect…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

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4. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Indicate whether this unexpected higher rate of inflation would help or hurt each of the following groups.

a homeowner with a fixed-rate mortgage.
a union worker with a fixed labor contract
a company that has invested some of its endowment in a government bonds which pay a fixed rate of return.

5. Indicate how each of the following events would affect the aggregate demand AD curve:

a short-run decrease in the price level
an increase in consumer confidence on the price level and real GDP
an increase in government purchases

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