Suppose that people expect inflation to equal 6 percent, but in fact, prices rise by 4 percent. Indicate whether this unexpectedly low inflation rate helps or hurts each of the following groups or individuals.
Helps
Hurts
The government
A homeowner with a fixed-rate mortgage
A union worker in the second year of a labor contract
A college that has invested some of its endowment in government bonds that are not indexed Treasury bonds
True or False: Inflation hurts borrowers and helps lenders because borrowers must pay a higher rate of interest.
A. True
B. False

For example, the upper right cell shows that if expresso advertises and beantown doesn't advertise, expresso will make a profit of $15 million, and beantown will make a profit of $2 million. assume this is a simultaneous game and that expresso and beantown are both profit-maximizing firms. if expresso decides to advertise, it will earn a profit of $ million if beantown advertises and a profit of $ million if beantown does not advertise. if expresso decides not to advertise, it will earn a profit of $ million if beantown advertises and a profit of $ million if beantown does not advertise. if beantown advertises, expresso makes a higher profit if it chooses . if beantown doesn't advertise, expresso makes a higher profit if it chooses . suppose that both firms start off not advertising. if the firms act independently, what strategies will they end up choosing? expresso will choose to advertise and beantown will choose not to advertise. expresso will choose not to advertise and beantown will choose to advertise. both firms will choose to advertise. both firms will choose not to advertise.