--%>
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 : What is the opportunity cost of your

    Suppose you arrive at a store expecting to pay $100 for an item, but learn that a store two miles away is charging $50 for it.  Would you drive there and buy it?  How does your decision benefit you?  What is the opportunity cost of your decision?  Now suppose you arrive at a s

    		•
  • Q : Cooperative and non-cooperative outcome

    Question: Cineplex and AMC are two rival movie theatre chains. They must each decide whether to set an admission price of $10 or set an admission price of $12; of course, the number of movie goers (and thus their r

    		•
  • Q : Advantage and disadvantage of Sole

    Illustrate the advantage and disadvantage of Sole proprietorship?

    		•
  • Q : Problem on Legislature budget XY School

    XY School District has a large number of students in need of remedial instruction. The superintendent of XY School System can allocated her budget between purchasing X units of remedial instruction at a price of $2,000/unit and spending an amount ($Y) on all other sch

    		•
  • Q : Characteristics of Perfectly

    Perfect competition is characterized by all of the following except w) heavy advertising by individual sellers. x) homogeneous products. y) sellers are price takers. z) a horizontal demand curve for individual sellers.

    Q : Government expenditures on goods and

    Explain Government expenditures on goods and services and transfer payments?

    		•
  • Q : Define Benefit Cost Ratio or

    Briefly describe the term Benefit Cost Ratio (or B/C Ratio) or Profitability Index (or PI)?

    		•
  • Q : Explain the term Earnings per share

    Briefly explain the term Earnings per share (or EPS)?

    		•
  • 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 : Government policies with respect to the

    Can you explain how different government policies with respect to the recycling of aluminum and paper might account for these different market outcomes?

    		•