7) What are the social costs of Inflation? Categorize and briefly explain the so

Question

7) What are the social costs of Inflation? Categorize and briefly explain the social costs of inflation for:

a) LL Bean and Company which now issues a catalog every month instead of every three months.

b) Your grandmother who purchases a 100,000USD annuity that promises to pay her a fixed amount of 10,000USD for the remainder of her life only to find the price level doubles every year.

c) A resident of a country runs to the grocery store after work every day after getting paid to buy a loaf of bread only to find the price has quadrupled since the day before.

d) An investor earns 50,000USD over a year on a 1,000,000USD portfolio and pays 10,000USD in taxes at a 20% tax rate in an economy with 10% annual inflation.

Explanation / Answer

Steady, predictable inflation is a feature of many developed economies and at low levels (around 3 percent for the United States) isn

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