Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?
A) Firms have to hire an extra worker to change prices in its store because of inflation.
B) A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation.
C) A bank collects a lower amount of interest from a loan because inflation was under-predicted.
D) A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year.
Question 2
Refer to Figure 19-7. At what level should the Indian government peg its currency to the dollar to make U.S. imports cheaper in India?
A) less than .02/rupee B) equal to .02/rupee
C) greater than .02/rupee D) 1/rupee
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