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?

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Rahul Sunny answered 2 years ago

1. If an economy suffers from unanticipated deflation, then a. the real burden of nominal debts...

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...

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?

Does unanticipated inflation hurt borrowers or lenders more? Explain why this is the case.

Expectations a. Explain briefly how expectations by firms of inflation can lead to inflation. b....

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...

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.

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Why is deflation dangerous? Explain how both unanticipated and anticipated inflation can lead to lower real...

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