Describe unanticipated inflation
Describe unanticipated inflation?
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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.
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Question: Suppose three identical firms are engaged in Cournot competition in quantities. They all have marginal costs equal to 40. Market demand is given by: Discover Q & A Leading Solution Library Avail More Than 1436292 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1929165 Asked 3,689 Active Tutors 1436292 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
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