Question

Identify how each of the following individuals is influenced by unexpected inflation.

a. A homeowner who has taken on a large house mortgage is  (Click to select)  worse off  better off  unaffected  due to unexpected inflation.

b. A lawyer whose costs and revenues both rise by the inflation rate is  (Click to select)  worse off  unaffected  better off  due to unexpected inflation.

c. The owner of a heavily indebted restaurant is  (Click to select)  better off  unaffected  worse off  due to unexpected inflation.

d. A worker with a union contract that includes a COLA clause is  (Click to select)  better off  worse off  unaffected  due to unexpected inflation.

Answer 1

a) A home owner who has taken on a large house mortgage is better off due to unexpected inflation as the amount that they are returning will be less in real value due to inflation.

b) As the cost and the revenue both have increased in the market the lawyer is unaffected.

c) Thw owner is a borrower who will be better off due to unexpected inflation.

d) As the worker have COLA they will remain unaffected due to unexpected inflation.