The country of Brokampia is experiencing severe and unanticipated inflation.

a. Explain the effect of this inflation on each of the following:

i. An 84 year old woman on a fixed income from the government.

ii. A 50 year old male repaying a signature loan with a fixed interest rate.

b. What fiscal policy could be used to reduce inflation?

c. Suppose that Brokampia experiences this inflation for an extended period of

time. What will be the effect of the nominal interest rate? Why.