. Explain how inflation, and more importantly, unexpected
inflation, can redistribute purchasing power from one group...
. Explain how inflation, and more importantly, unexpected
inflation, can redistribute purchasing power from one group to
another. Use specific examples involving wages and interest
rates.
Explain how inflation can redistribute income. Why does an
unexpected rise in the inflation rate make workers and lenders
worse off? Who is made better off? Why does correctly anticipated
inflation does not have these distributional effects?
Explain how inflation can redistribute income. Why does an
unexpected rise in the inflation rate make workers and lenders
worse off? Who is made better off? Why does correctly anticipated
inflation does not have these distributional effects
Question 2: Explain how inflation can
redistribute income. Why does an unexpected rise in the inflation
rate make workers and lenders worse off? Who is made better off?
Why does correctly anticipated inflation does not have these
distributional effects?
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...
Question 3: In the light of Purchasing-Power Parity theory
explain how inflation rate a county affects its nominal exchange
rate?
Question 4: Explain why and how net exports and net capital flow
are related to each other. Does trade deficit necessarily create
trouble for a county’s economic growth? Discuss.
1. Explain Purchasing Power Parity.
2. Suppose Russia's inflation rate is 200% over one year but the
inflation rate in Switzerland is only 2%. According to relative
PPP, what should happen over the year to the Swiss franc's exchange
rate against the Russian ruble?
3. In order for the condition E$/HK$ = PUS/PHK to hold, what
assumptions does the principle of purchasing power parity make?
Please note HK means Hong Kong.
What does Purchasing Power Parity suggest? How can you explain
the devaluation in Polish Zloty from PPP perspective? What should
Poland have done to avoid devaluation?