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What is the CPI most likely measuring?
inflation and deflation
What groups would most likely be hurt financially by unexpected inflation?
which of the following group is most hurt by unexpected inflation
How do interest rates affect consumption?
Real interest rates influence the level of household consumption in a country. Consumption of durable goods is interest sensitive, since households will sometimes finance the purchase of "big ticket items" such as automobiles, household appliances, computers, televisions, and other goods through borrowing. Households will respond to higher real interest rates by decreasing their consumption of these non-essential items since it becomes more costly to borrow when interest rates rise.Real interest rates are determined by taking the nominal interest rate, which is the actual percentage charged by banks for a loan, and subtracting the rate of inflation. For instance, a nominal interest rate of 5% in a situation where unanticipated inflation is 2% equates to a real interest rate of 3%. Households consider the real rate of interest when deciding to purchase durable goods requiring financing.If inflation is anticipated, banks will charge higher nominal interest rates to borrowers and therefore anticipated inflation has little or no effect on the real interest rate and consumption. Nominal interest rates rise with anticipated inflation as banks must charge higher rates to maintain their profits, since inflation erodes the value of money and a borrower would be paying back money worth less than the money he borrowed if nominal rates were not increased. However, if there is unanticipated inflation, or inflation greater than the rate anticipated by banks and incorporated into the rate charged to borrowers, then this will reduce the real interest rate and induce households to spend on durable goods, since the opportunity cost of holding money (the inflation rate) increases while the opportunity cost of spending money (the nominal interest rate) remains the same.During periods of unanticipated inflation, the real interest rate falls and households are more likely to consume more at every level of disposable income. If there is unanticipated deflation (a decrease in the price level), then the real interest rate rises, and since households would now have to pay back their lending banks with money worth more than that borrowed, the incentive is to save more and decrease consumption. A rise in real interest rates caused by a decrease in the price level results in less consumption at each level of disposable income.
Debtors or creditors would be more likely to favor inflation?
Debtors.
If expected inflation increases interest rates are likely to increase?
Yes, inflation and increases in interest rates usually go hand-in-hand, though inflation is not the sole cause of an increase in interest rates
Will you draw more social security when you reach age 72 than you were receiving at age 62?
If you mean the age at which you BEGIN to draw Social Security Retirement, yes. If you wait longer, your monthly payment is greater. However, once you begin to draw benefits, the monthly amount stays the same, except when there is a "cost of living" increase.
What is the CPI most likely measuring?
inflation and deflation
What is a synomyn for anticipated?
* certain * forseen * likely * predictable * sure (I got these from http://dictionary.reference.com)
What anticipated mean?
"Anticipated" means expected or predicted to happen in the future based on current information or trends. It is often used to describe something that is likely to occur.
What groups would most likely be hurt financially by unexpected inflation?
which of the following group is most hurt by unexpected inflation
A depreciation in the external value of the currency is likely to...?
increase inflation
How do interest rates affect consumption?
Real interest rates influence the level of household consumption in a country. Consumption of durable goods is interest sensitive, since households will sometimes finance the purchase of "big ticket items" such as automobiles, household appliances, computers, televisions, and other goods through borrowing. Households will respond to higher real interest rates by decreasing their consumption of these non-essential items since it becomes more costly to borrow when interest rates rise.Real interest rates are determined by taking the nominal interest rate, which is the actual percentage charged by banks for a loan, and subtracting the rate of inflation. For instance, a nominal interest rate of 5% in a situation where unanticipated inflation is 2% equates to a real interest rate of 3%. Households consider the real rate of interest when deciding to purchase durable goods requiring financing.If inflation is anticipated, banks will charge higher nominal interest rates to borrowers and therefore anticipated inflation has little or no effect on the real interest rate and consumption. Nominal interest rates rise with anticipated inflation as banks must charge higher rates to maintain their profits, since inflation erodes the value of money and a borrower would be paying back money worth less than the money he borrowed if nominal rates were not increased. However, if there is unanticipated inflation, or inflation greater than the rate anticipated by banks and incorporated into the rate charged to borrowers, then this will reduce the real interest rate and induce households to spend on durable goods, since the opportunity cost of holding money (the inflation rate) increases while the opportunity cost of spending money (the nominal interest rate) remains the same.During periods of unanticipated inflation, the real interest rate falls and households are more likely to consume more at every level of disposable income. If there is unanticipated deflation (a decrease in the price level), then the real interest rate rises, and since households would now have to pay back their lending banks with money worth more than that borrowed, the incentive is to save more and decrease consumption. A rise in real interest rates caused by a decrease in the price level results in less consumption at each level of disposable income.
Debtors or creditors would be more likely to favor inflation?
Debtors.
If expected inflation increases interest rates are likely to increase?
Yes, inflation and increases in interest rates usually go hand-in-hand, though inflation is not the sole cause of an increase in interest rates
What condition is most likely to exist when there is a general slowdown of the economy?
less inflation .
Which conditions is most likely to exist when there is a general slowdown of the economy?
Less inflation.
What is likely to happen to yield to maturity on bonds in the marketplace if inflationary expectations increase?
The prices of bonds will fall and yields to maturity (or call date) will rise, since investors will require greater yields on their investments to offset the expected increase in inflation.
