Question 2 A) The index number representing the price level changes from 110 to 115 in one year, and then from 115 to 120 the next year. Since the index number increases by five each year, is five the inflation rate each year? Is the inflation rate the same each year? Explain your answer B) A mortgage loan is a loan that a person makes to purchase a house. The following table provides a list of the mortgage interest rate being charged for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money? (Hint: Use Fisher Effect Equation) Year Mortgage Interest Rate Inflation Rate 1984 1990 12.4% 10% 7.0% 4.3% 5.4% 2.8% 2001