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Explain why borrowers of money and lenders of money view

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Reference no: EM133522447

Question 1. A home was purchased for $3,200 in the year 1943. As of the year 2012, its market value was $850,000.

Using the concepts of purchasing power, inflation, and price indexes how would you explain this tremendous increase in value?
Are there any other possible outside factors besides the above which might also help explain the increase?

Question 2. Explain why borrowers of money and lenders of money view inflation differently.
a. How do borrowers normally react to high inflation rates?
b. How do lenders normally react to high inflation rates?

Question 3. Discuss whether there are some positive (good) aspects to high inflation. If there aren't any, explain why.

Question 4. If you were an employer would you favor a law which forces you to increase your employee's wages each year by the same % as the inflation rate? Explain.

 

Reference no: EM133522447

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