Question

Assume the CPI increases from 100 to 110. Explain the impact of this inflation (helped, hurt, not impacted) on each of the following:
A surveyor who took out a 5% fixed-rate loan last year to buy new equipment.
A bank that awarded a 6% fixed-rate loan to a couple buying their first home.
A company signs a contract to clean classrooms at a fixed rate for the next 5 years. The company does not have a labor contract with its employees.
A union worker who received a 10% cost of living adjustment.
A student who currently earns 2% interest on her savings account.

Answer 1

Inflation is the act wherein the general price level of the goods and services have sustained. It is also has a tendency to reduce the value of money when it is too high, but it also depends on the interest rate if it’s higher. Therefore the answers of these would be:

 

a. Considering the fixed rate of the new equipment, it would gain 4% 

b. Due to the loan, 4% would be lost. 

c. Lack of the documentation of the employees would allow the company to lose.

d. The result would be unchanged.

e. The result would be the loss of 8%