Suppose that people expect inflation to equal 3 percent, but in fact, prices rise by 5 percent.

Question:

Suppose that people expect inflation to equal 3 percent, but in fact, prices rise by 5 percent. Describe how this unexpectedly high inflation rate would help or hurt the following:
a. The government
b. A homeowner with a fixed-rate mortgage
c. A union worker in the second year of a labor contract
d. A college that has invested some of its endowment in government bonds