Who gains if inflation turns out to be higher than expected: the lender or borrower? What happens if inflation turns out to be lower than expected?
Borrowers and lenders normally incorporate an inflation premium equal to the expected rate of inflation into the nominal interest rate. Then, if inflation turns out to be higher than expected, the borrower has to pay the lender only the agreed-on nominal interest rate, including the premium for expected inflation; he does not have to compensate the lender for the (higher) actual inflation. Thus, the borrower enjoys a windfall gain and the lender loses out. The opposite happens if inflation turns out to be lower than expected.
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Total fixed cost is the cost of
A) labor. B) production. C) a firm's fixed factors of production. D) only implicit factors of production. E) only explicit factors of production.
Total expenditures for new final goods equals total output of new final goods in the income and product accounts
A) because no one will produce what cannot be sold. B) because prices will rise or fall to clear the market. C) because unsold goods are assumed to be purchased by the firms that produced them. D) only at equilibrium. E) when all goods are sold in the year they are produced.
In the above figure, if the market price is less than $7, the firm
A) produces 10 units. B) produces 8 units. C) produces 0 units. D) produces 11 units.
Studies have found which of the following economic terms mentioned most often in U.S. newspapers?
a. Unemployment b. Productivity c. Inflation d. Monetary policy