Suppose that inflation in Australia was expected to be 3% in 2016, but that prices rose by 5% instead.

Suppose that inflation in Australia was expected to be 3% in 2016, but that prices rose by 5% instead. Would the unexpectedly high inflation help, hurt or have no effect on the following. After identifying the effect that the higher than anticipated inflation has in each case, briefly explain the reason why in one of two sentences for each case. (4 marks)

a.    The federal government (1 mark)

b.    A homeowner with a fixed rate mortgage (1 mark)

c.    A private school that has invested some of its endowment in government bonds (1 mark)

d.    A pensioner whose pension has been indexed based on the forecasted anticipated rate of inflation. (1 mark)