6. Wage agreements and loan contracts are two types of multi-period agreements that are important for economic growth. Suppose you sign a two-year job contract with Wells-Fargo stipulating that you will receive an annual salary of $93,500 plus an additional 2% over that in the second year to account for expected infl ation.

a. If the infl ation rate turns out to be 3% rather than 2%, who will be hurt by this? Why?

b. If the infl ation rate turns out to be 1% rather than 2%, who will be hurt by this? Why?

Suppose that you also take out a $1,000 loan at the Cavalier Credit Union. The loan agreement stipulates that you must pay it back with 4% interest in one year, and again, the infl ation rate is expected to be 2%.

c. If the infl ation rate turns out to be 3% rather than 2%, who will be hurt by this? Why?

d. If the infl ation rate turns out to be 3% rather than 2%, who will be helped by this? Why?