What if the deflation continued for a number of years

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A mortgage company lends the Miller family $100,000 to buy a house worth $105,000. During the next year, there is deflation and all prices, including house prices, unexpectedly fall by 10%.

1. After the first year, who is better off?

2. After the first year, who is worse off?

3. What if the deflation continued for a number of years-do you think the Millers would be able to pay off their mortgage? Why or why not?

Reference no: EM13233552

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