8. Problems and Applications Q8

Suppose that people expect inflation to equal 5 percent, but in fact, prices rise by 7 percent.

Which of the following groups or individuals are hurt by this unexpectedly high inflation rate?Check all that apply.

___A college that has invested some of its endowment in government bonds that are not indexed Treasury bonds

___The government

___A union worker in the second year of a labor contract

____A homeowner with a fixed-rate mortgage