In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes.

Country Y is experiencing severe and unanticipated inflation.

1. Explain the effect of this inflation on each of the following.
2. A family with savings in a fixed-interest-rate time deposit account
3. A business repaying a long-term, fixed-interest-rate loan
4. Identify one fiscal policy action that could be implemented to reduce inflation.
5. Identify an open-market operation that could be implemented to reduce inflation.
6. Suppose that Country Y continues to experience high inflation in the long run. Indicate the effect of this inflation on the nominal interest rate in Country Y.
7. If Country Y's inflation is high relative to that of other countries, explain the effect of this inflation on the international value of Country Y's currency.