The Costs of Anticipated and Unanticipated Inflation. The Fisher Effect I. What is the difference between anticipated and unanticipated inflation? What are the specific costs of unanticipated inflation? II. Suppose you lend your friend 100 for one year at 9% nominal interest. (a) How many pounds of interest will your friend pay you at the end of the year? (b) Suppose, at the time you both agreed to the terms of the loan, you both expected the inflation rate to be 4% during the year of the loan. What do you both expect the real interest rate to be on the loan? What does the real interest rate measure? (c) Suppose, at the end of the year you are surprised to discover, that the actual inflation rate over the year was 7%. Define: (1) the actual real interest rate generated by this loan; (i) the actual real interest rate on this loan, if the actual inflation rate had turned out to be a whopping 11%; what it means to have a negative real interest rate - explain briefly; (iii) the actual real interest rate, if the actual inflation rate over the life of the loan was only 2%. Make a