Under what circumstances will inflation help borrowers at the expense of lenders? Under what circumstances will both parties be unaffected? Which scenario would you expect in the long run?
Only when inflation increases more than is anticipated will borrowers gain at the expense of lenders. If inflation increased less than is anticipated, lenders would actually gain at the expense of borrowers. When inflation is accurately anticipated, nominal interest rates will adjust and neither borrowers nor lenders will gain. Since there is no reason to believe decision makers will systematically underestimate or overestimate inflation, there is no reason to believe that either party will have an advantage over the other in the long run.
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The effect of changes in economic activity on the budget deficit is called
A) fine tuning. B) debt monetization. C) the structural deficit. D) tax smoothing. E) none of the above
Dairy farmers hold an annual Capitol Hill ice cream social that provides free ice cream for congressional staffers during which time representatives from the industry discuss issues with, and provide information to, congressional staff. This is an example of
a. logrolling. b. rent seeking. c. pork-barrel legislation. d. the shortsightedness effect.