EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
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Chapter 12, Problem 4AP
To determine
Effect of cashless society on expected inflation
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Whether one regards inflation as a “good” thing or a “bad” thing depends very much on one’s economic situation. If you are a borrower, unexpected inflation is a ["", "", "", ""] thing—it reduces the value of money that you must repay. If you are a lender, it is a ["", ""] thing because it reduces the value of future payments you will receive.
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- Menu costs and shoe leather costs are the two costs of inflation. Explain each of them with some real world examples.arrow_forwardInflation is defined as increases in the average prices in the economy. The February 2022 inflation rate is 7.9% which is the highest in the last 40 years. Have you noticed the price increases in your daily life? What goods are increased by the most? and by how much? What do you think are the causes of the recent inflation? How do you cope with the inflation?arrow_forwardSuppose that people expect inflation to be 3 percent but that, in fact, prices rise by 10 percent. Briefly describe whether this unexpectedly high inflation would either a) help or hurt the following people, and b) why.a. A person receiving Social Security;b. A homeowner with a fixed-rate mortgage;c. a union worker in the second year of a labor contract with fixed wages;d. a family on food stamps (SNAP) who needs to buy groceries;e. a person trying to pay off their variable-rate charge cards;f. A restaurant that has not bought supplies yet and can't change the menu prices.arrow_forward
- Which of the following groups would most likely be harmed by inflation? Group of answer choices spenders workers retirees none of the above Older people often reminisce about the “good old days” when prices were much lower. This is misplaced nostalgia primarily because in the “good old days” Group of answer choices prices were not really that low wages were much lower also When interest rates fall, investment expenditures by businesses Group of answer choices decrease increasearrow_forwardGive four examples of goods or services that have exhibited inflation in recent years.arrow_forwardExplain the effects of inflation on various groups of people in the society.arrow_forward
- On the way into school you hear the following report on the radio: "inflation for the month of February was 0.4%. Over the year inflation was 2.2%." Which of the following options best explains what these figures mean? Select one: a. Inflation in February was much slower than it was in other months from the past year. b. The prices of household necessities, excluded household luxuries, increased by 2.2%, compared to 12 months ago. c. The prices of the things a typical urban consumer buys, as estimated by the Bureau of Labor Statistics, increased on average 2.2%, compared to 12 months ago. d. The government increased prices by 2.2% over the past year in order to keep pace with production costs.arrow_forwardSuppose that people expect inflation to equal 5 percent, but in fact, prices rise by 7 percent. Which of the following groups or individuals are hurt by this unexpectedly high inflation rate? Check all that apply. The government A union worker in the second year of a labor contract A homeowner with a fixed-rate mortgage A college that has invested some of its endowment in government bonds that are not indexed Treasury bondsarrow_forwardBased on real life situations and what we learn in Economics, is there any benefit to inflation? Explain in great detail with good economic basis.arrow_forward
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