Question #2: Under which one of the following situations would you be better off
ID: 1133435 • Letter: Q
Question
Question #2:
Under which one of the following situations would you be better off?
A.
You have $10,000 in your savings account paying 5 percent per year and unanticipated inflation is 8 percent per year.
B.
You lend a friend $10,000 at 2 percent to be repaid in one year and unanticipated inflation is 4 percent during the year.
C.
You have paid $500 for a $1,000 U.S. savings bond that matures in 10 years and unanticipated inflation is 10 percent per year.
D.
You borrowed $10,00 at 2 percent to pay for this year's college expenses and unanticipated inflation is 3 percent during the year.
Question #3:
In an economy, households receive a total income of $4 million. Of this, $2.5 million are wages received for labor services, $1 million are rental payments, and $250,000 are interest payments received. In this economy, what are the costs of production and profits equal to respectively?
A.
$4 million; $500,000
B.
$4 million; $250,000
C.
$7.75 million; $250,000
D.
$7.75 million; 0
Suppose the rate of inflation unexpectedly decreases from 7% to 4%. Which one of the following would most likely benefit from this unexpected reduction in the rate of inflation? OA. a borrower whose loan has a fixed nominal interest rate. O B. creditors. OC. debtors. D. workers who are covered by a COLA agreement.Explanation / Answer
Ans1)B (creditors)
creditors would be most likely benefit from this unexpected reduction in the rate of inflation.