Inflation, deflation and discretionary fiscal policy
1.Explain the various types of inflation and its consequences. Suppose you borrow $1000 from a bank at 5% interest for one year and the inflation rate that year is 10%. Was this loan advantageous to you or to the bank?
2.Explain two limitations of the discretionary fiscal policy.
3.Describe the difference between inflationary gap and deflationary gap.