choices:

unstable growth

inflation

interest-rate instability

exchange rate instability

Explain the costs of each of the following conditions and explain who bears them. (Click to select) makes output unstable. It also increases risk and therefore the risk premium on bonds. With a higher risk premium, it is more costly for firms to borrow. Firms will decrease their investments, which will hurt economic growth (Click to select) makes the revenue from exports and the costs of imports unpredictable. This hurts individuals engaged in ) foreign trade. This problem is particularly severe in emerging economies. creates uncertainty, which reduces investment and hurts growth. When this is higher than expected, the real value of the payments received by lenders falls. Someone on a fixed salary is also hurt when this is higher than expected (Click to select) makes people less sure about their future incomes and less willing to borrow. Another reason for the decrease in borrowing is that the uncertainty with this problem increases the risk premium and makes borrowing more costly. Lower levels of borrowing reduce investment (Click to select)