PLAY. Learn. • Uncertainty about future prices increases risk and so discourages investment.

Learn vocabulary, terms, and more with flashcards, games, and other study tools. Social Security recipients c. workers who sign new work agreements every day d. wealthy people who hold much cash in their wall safes This means that prices have tripled in one year.what occurs when increases in costs force firms to raise prices. C) lender correctly anticipates inflation and increases the nominal interest rate accordingly. D) inflation is unanticipated by both borrower and lender. Unanticipated Inflation. Question 24 0 out of 3.33 points Unanticipated inflation tends to damage _____ most.
If inflation is anticipated, individuals and businesses may be able to take steps to lessen or eliminate adverse redistribution effects Cost-of-living adjustments, adjustable-rate mortgages and increasing nominal interest rates are techniques for avoiding or reducing the damaging effects of inflationrefers to the change in economic standing because of a change in someone's money (nominal) income relative to the overall price level.

Unanticipated inflation can bring with it a number of problems. With higher uncertainty, lenders ask for a premium to compensate for the uncertainty.

It leads to high-risk premiums and economic uncertainty. Unanticipated inflation occurs when people do not know inflation is going to occur until after the general price level increases. Which one of the following groups is most hurt by unanticipated inflation? Unanticipated inflation reduces the validity of the information on market prices for economic agents. Over the years, unexpected inflation impacts employment, investment, and profits.

If there is inflation, the nominal value will be misleading because inflation erodes the purchasing power.

Match. Selected Answer: borrowers Correct Answer: lenders Question 25 3.33 out of 3.33 points Volunteers in … a farmer buys machinery with a fixed-rate loan to be repaid over a ten-year periodyour savings from your summer job are in a savings account paying a fixed rate of interesta widow lives entirely on income from fixed-rate corporate bondsa firm signs a contract to provide maintenance services at a fixed rate for the next five yearsa local government receives revenue mainly from fixed-rate license fees charged to businessesyour friend rents an apartment with a three-year leasea bank has loaned millions of dollars from home mortgages at a fixed rate of interest Write.

B) short-term rate of inflation is less than the long-term rate of inflation. STUDY. A nominal wage increase caused by pressure from labor unions could be one reason that costs increase. When a worker's nominal income rises faster than the rate of inflation, the worker is better off.refers to a change in economic standing because the prices of (some) goods and services rise faster or slower than prices on average. Start studying Winners and Losers {of unanticipated inflation}.
unanticipated inflation occurs when inflation either was not expected or is higher than had been expected Households, firms and government are uncertain what the rate of inflation will be in the future. The purpose is to maintain the purchasing power of the individual's wage. phuocnguyen. The additional demand causes output to expand but also leads to higher production costs and prices.what occurs when someone looks at money ("nominal") values rather than real values to determine how well off he or she is. A) long-term rate of inflation is less than the short-term rate of inflation. refers to the gains and losses in the value of an individual's assets due to inflation. Gravity. Generally, inflation is considered to be ________if the annual rate of price increase exceeds 200%. Spell. Unanticipated inflation arbitrarily redistributes real income at the expense of fixed-income receivers, creditors, and savers. In recent years, oil and energy prices have been blamed for causing ___________.what occurs when the demand for goods and services increases at a time when the production of goods and services is already high, which means that labor and resource markets are tight. Created by. This typically occurs when a government uses a progressive tax system that is based on nominal income.what periodically adjusts payments for changes in the consumer price index. Flashcards. refers to the gains and losses in the value of an individual's assets due to inflation. If the price of an asset rises faster than the average of all prices, the wealth effect is positive and the individual has gained because of the inflation.refers to a situation when prices rise at extraordinary rates. Test. Unanticipated inflation benefits debtors/ because of inflation, pays back the principal and interest with "cheap" dollars whose purchasing power has been eroded by inflation. When the price of a good rises faster than prices in general, the people who buy that good find themselves worse off compared to those who don't buy the goodwhat occurs when (nominal) wage increases that match the rate of inflation cause a taxpayer to move into a higher tax ______, even though their real wage remains the same. a. workers with cost-of-living adjustment clauses in their labor contracts b. Correct Answer: the sudden acceleration of the rate of price increases above expected inflation.

Terms in this set (9) The Wealth Effect.

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