Question

One of the costs of unexpected inflation is an arbitrary redistribution of purchasing power. Find the loser and winner of the following transactions. In other words, describe how the purchasing power is redistributed with these transactions. b. Jennifer took out a fixed-interest-rate loan from Bank H when the CPI was 100. She expected the CPI to increase to 103 but it actually increased to 105. c. Nick bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. c. Nick bought some shares of stock and, over the next year, the price per share decreased by 7 percent and the price level decreased by 9 percent. d. Jackie saves $100 and receives $106 the next year. During the same year, the price of the basket of goods that she purchases increases from $100 to $104.e. Fifteen years ago T’s parents purchased some land with the idea of selling it later to help pay your college expenses. They purchased the land for $100,000. They sold if for $180,000. During the time they held it the price level rose from 80 to 120.f. One year ago Sam purchased bonds for $100,000. He just sold them for $120,000. During the year the price level rose by 5%.g. Mitch makes payments on a car loan. If the price level a year ago was 120 and people expected it to rise to 125 but it actually rose to 128.

Answer 1