Question

Suppose that expected inflation to equal 6 per cent in 2015, but in fact price rise by only 3 per cent. How would this unexpectedly low inflation rate help or hurt the following?
a) The federal government
b) A homeowner with a fixed-rate mortgage
c) A worker with a 5-years fixed term wage contract
d) A causal worker who has no labour contract
e) A private school that has invested some of its endowment in Government Bonds.

Answer 1

Suppose that expected inflation to equal 6 per cent in 2015, but in fact price rise by only 3 per cent. This unexpectedly low inflation rate will influence the following in such way:
a) The federal government will be helped
b) A homeowner with a fixed-rate mortgage will be hurted.
c) A worker with a 5-years fixed term wage contract will be helped.
d) A causal worker who has no labour contract will be hurted.
e) A private school that has invested some of its endowment in Government Bonds will be helped.