Question

3. If you are a borrower, are you better off with inflation or deflation? Why?

4. Welfare economics provides a framework for evaluating the impact of a normative statement or government policies. Explain the framework of welfare economics. What are consumer and producer surplus? Explain why there are differences in willingness to pay along the demand market curve. Explain why there is a difference in costs along the market supply curve.

5. Explain the difference between real and nominal dollars. Explain why it is important to use real dollars when evaluating trends in prices.

6. Figure 11.6 Macroeconomic policy linkages to agriculture, shows direct links between macroeconomic policies and agriculture. Explain the impact contractionary monetary policies have on interest rates and inflation. Further, explain how these changes in interest rates and inflation impact agricultural commodity and agricultural input prices.

Answer 1

Answering only first question as per HomeworkLib policy.

q3) a borrower benefits from inflation, bcoz during inflation, price level rise, hence value of money falls.

so a borrower returns the money with reduced value to the lender, & hence lender loses , & borrower gains from unexpected rise in price level.

so as inflation reduces the real value, that is purchasing power of money, so borrower benefits from inflation