Question: there is a persistent fear that there will be a high level of deflation. many economists warn that it may be worse for the economy

there is a persistent fear that there will be a high level of deflation. many economists warn that it may be worse for the economy than if there is high inflation. suppose that herb is in debt and has to pay a

4.5 %

nominal interest rate. Hr expected inflation to be

1 % .

instead, inflation is

- 2 % (

deflation

)

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