--%>
Assignment Help - homework help

Describe unanticipated inflation

Describe unanticipated inflation?

E

Expert

Verified

Debtors (borrowers) can be helped and lenders hurt by unanticipated inflation. Interest payments may be less than the inflation rate, so borrowers receive “dear” money and are paying back “cheap” dollars that have less purchasing power for the lender. If inflation is anticipated, the effects of inflation may be less severe, since wage and pension contracts may have inflation clauses built in, and interest rates will be high enough to cover the cost of inflation to savers and lenders. “Inflation premium” is amount that interest rate is raised to cover effects of anticipated inflation. “Real interest rate” is defined as nominal rate minus inflation premium.

   Related Questions in Business Economics

  • Q : Describe financial leverage and low

    Describe briefly high financial leverage, low operating leverage?

    		•
  • Q : When productive resources are utilized

    While productive resources are utilized efficiently: (w) prices greatly exceed production costs for current outputs. (x) opportunity costs are at their minimums for all goods. (y) domestic production exceeds the value of foreign output. (z) the value

    		•
  • Q : Marginal rate of substitution Problem:

    Problem: Luke likes to consumer CDs (good1) and pizzas (good 2). His preference over both goods is given by the utility function U(x1; x2) = x21

  • Q : Define the term invisible hand in

    The “invisible hand” of the marketplace is a word referring to consider as: (w) government policies to set market prices at equilibrium levels. (x) speculative manipulations which create disequilibrium. (y) automatic adjus

    		•
  • Q : Rivalry for various types of resources

    Intermediaries ultimately prosper only when they give a service of decreasing: (1) demand for a good (2) prices paid to manufacturers of a good. (3) transaction costs. (4) rivalry for various types of resources. (5) cut-throat competition into markets

    		•
  • Q : Prices are the automatic regulator

    “Prices are the automatic regulator that tends to keep production and consumption in line with each other.”  Explain.

    		•
  • Q : Illustrate the 4th role is the

    Illustrate the 4th role is the reallocation of resources?

    		•
  • Q : Resource markets in simple circular

    Can someone help me in finding out the right answer from the given options. In resource markets in a simple circular flow model, house-holds exchange their _________ for _________. (1) Resources | income. (2) Goods | profits. (3) Labor | goods. (4) Devotion | enlighte

    		•
  • Q : What do you mean by Financial Linkages

    What do you mean by Financial Linkages in U.S. and World Trade?

    		•
  • Q : Explain Self-interest of the Market

    Explain Self-interest of the Market System?

    		•