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Unformatted text preview: 09/04/2008 09:55:00 ← Costs of Unanticipated Inflation • 1)Harms savers • 2) Harms lenders o r= i- pi • 3) Harms those with fixed incomes • 4) Harms payees (landlords) of fixed-price contracts • Tend to harm those with wealth ← Unanticipated Inflation • 1) Benefits spenders. • 2) Benefits borrowers. o Benefits borrowers same reason it harms lenders. • 3) Benefits owners of resources whose prices are increasing the most. • 4) Payers of fixed price contracts o Ex: Tenants o Inflation= Purchasing power is less and less • Tend to benefit those without wealth. ← • Unanticipated deflation has the opposite effects. Price reflects people’s income. o Deflation can be much more disruptive. o Also think Shay’s Rebellion. ← Causes of Inflation: • Aggregate Demand Inaggregate Supply Model. o Our demand in economy is basically looking at desire spending. Our demand in economy is basically looking at desire spending....
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