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Question of the Week - Economics
Larry Anderson, economist with RTG Financial Inc., is discussing effects of inflation with his colleague, Christopher. Discussing the impacts of unanticipated increase in inflation, Larry says, “Unanticipated increases in inflation create losses for fixed-rate borrowers.”
The two then went on to discuss the impacts of high anticipated inflation. Christopher states, “High anticipated inflation reduces the level and growth rate of GDP by increasing real after-tax returns on investment, increasing transaction costs, and decreasing productive activity.”
Are the statements made by Larry and Christopher correct?
Question of the Week - Economics 59 votes
Larry is correct but Christopher is not
Christopher is correct but Larry is not
Both of them are incorrect