Inflation and Unemployment – Week 7

Inflation and Unemployment – Week 7

Inflation and Unemployment
Please respond to the following:

· Imagine that you have a fixed 30-year interest rate for your mortgage, and the economy has experienced unanticipated inflation. Examine who the winner and loser would be. Is it the borrower or the lender in the given scenario? Provide support for your response.

Bonus Question #1:

The average CPI in 1930 was 16.70 and in 2017 it was 245.12. In 1930, legendary baseball player Babe Ruth was paid $80,000.00. How much would his 1930 salary be worth in 2017?

(Note: The CPI numbers in the above exercise were obtained from this website, using the average annual index: http://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx? )

Bonus Question #2:

Given the information below, what would the official unemployment rate be reported as?

https://yellowdig-assets.s3.amazonaws.com/1fcb4a8b-214a-4655-9f78-51df1d3fae7a

Solution Preview

Inflation and Unemployment

Question 1

Imagine that you have a fixed 30-year interest rate for your mortgage, and the economy has experienced unanticipated inflation. Examine who the winner and loser would be. Is it the borrower or the lender in the given scenario? Provide support for your response.

(220 words)