Why is deflation dangerous? Explain how both unanticipated and
anticipated inflation can lead to lower real...
Why is deflation dangerous? Explain how both unanticipated and
anticipated inflation can lead to lower real GDP and higher
unemployment. Why was there deflation during the Great Depression,
from 1929 to 1933?
1. If an economy suffers from unanticipated deflation, then
a.
the real burden of nominal debts increases.
b.
the real burden of nominal debts falls.
c.
the price level increases unexpectedly.
d.
it becomes easier for borrowers to repay their debts.
e.
the value of money falls
2. In the classical model, an increase in the demand for labor
leads to
a.
an increase in the production function.
b.
an increase in real wages.
c.
an increase in the quantity...
Describe how a lender can lose during inflation if the inflation
is unanticipated and the loan is a fixed-interest-rate loan.
How would a variable-interest-rate loan (one that adjusts over
the contract period) eliminate these loses?
Expectations
a. Explain briefly how
expectations by firms of inflation can lead to inflation.
b. Explain briefly how
expectations by workers of inflation can lead to inflation.
c. Explain briefly how
expectations of interest rates rising can lead to interest rates
rising.
d. Explain briefly how
expectations of exchange rates rising can lead to exchange rates
rising.
Neoclassical economists believe that only unanticipated
inflation has real effects. Explain this using the AS/AD-framework.
In light of this discuss the desirability and feasibility of
government stabilization policy.
1. Explain the meaning of inflation and deflation with relevant
examples
2.Explain the cost of inflation with relevant examples
3. Explain the causes and effects inflation and deflation with
relevant examples