Question: In the following examples, is inflation creating winners and losers at no net cost to the economy or is inflation imposing a net cost on the economy? If a net cost is being imposed, which type of cost is involved?
a. When inflation is expected to be high, workers get paid more frequently and make more trips to the bank.
b. Lanwei is reimbursed by her company for her workrelated travel expenses. Sometimes, however, the company takes a long time to reimburse her. So when inflation is high, she is less willing to travel for her job.
c. Hector Homeowner has a mortgage with a fixed nominal 6% interest rate that he took out five years ago. Over the years, the inflation rate has crept up unexpectedly to its present level of 7%.
d. In response to unexpectedly high inflation, the manager of Cozy Cottages of Cape Cod must reprint and resend expensive color brochures correcting the price of rentals this season.