Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Describe how this unexpectedly high inflation rate would help or hurt the following: the government a homeowner with a fixed-rate mortgage a union worker in the second year of a labor contract a college that has invested some of its endowment in government bonds

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
Problem 11P
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  1. Suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent. Describe how this unexpectedly high inflation rate would help or hurt the following:

    1. the government

    2. a homeowner with a fixed-rate mortgage

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

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

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