\"Inflation\" Please respond to the following: Imagine that you have a fixed 30-
ID: 1092707 • Letter: #
Question
"Inflation" Please respond to the following: Imagine that you have a fixed 30-year interest rate for your mortgage, and the economy has experienced unanticipated inflation.
Examine who the winner and loser would be either the borrower or the lender in the given scenario. Provide support for your response. You have been hired as a consultant for your state.
You have been asked to understand what would happen to the rate of inflation if the state experienced economic growth. Explain how the rate of inflation would change if your state experienced economic growth.
Explanation / Answer
Similarly, the price of gold has often been a good indicator of future inflation: a large increase in the price of gold often indicates that the market has come to expect inflation in the future, and a large decrease often precedes a decline in inflation. Even more tight ought to be the relation between expected inflation and the spread between the yields on ordinary Treasury bonds and inflation-indexed Treasury bonds of the same maturity. Both the price of gold and this yield spread are the result of the judgments of market participants about the future, not the past. For that reason, they are far more valuable than knowledge of last month
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