The accompanying table provides the inflation rate in the year 2005 and the average inflation rate over the period 2006–2019 for eight different countries.
Country Inflation rate in 2005 Average inflation rate in 2006–2019
Brazil 6.87% 5.47%
Canada 2.2% 1.72%
China 1.77 2.68
France 1.74 1.23
Indonesia 10.45 5.83
Japan −0.28 0.35
Turkey 8.18 9.53
United States 3.39 1.95
Data from: IMF.

A) Given the expected relationship between average inflation and menu costs, rank the countries in descending order of menu costs using average inflation over the period 2006–2019.

B) Rank the countries in order of inflation rates that most favoured borrowers with 10-year loans that were taken out in 2005. Assume that the loans were agreed upon with the expectation that the inflation rate for 2006 to 2019 would be the same as the inflation rate in 2005.

C) Did borrowers who took out 10-year loans in Japan gain or lose overall versus lenders? Explain.

Answer rating: 100% (QA)

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