Answer:
Which of the following is not a cost created by high inflation?
A. Inflation causes the real wage to fall which means that firms have to pay more for workers.
B. Inflation causes the real interest rate to change which can make it more difficult to borrow and lend money.
Explanation:
High inflation may also lead to higher borrowing costs for businesses and people needing loans and mortgages as financial markets seek to protect themselves against rising prices and increase the cost of borrowing on short and longer-term debt.
Accounting is the process of recording financial transactions pertaining to a business.
A. Define the Problem first before take action.
Answer:
The correct option is (d)
Explanation:
Real wages are nominal wages less inflation. Nominal wage is not adjusted for inflation. Everyone had expected an inflation of 3% per year while increase in wages per year is 5%. This implied that they will expect real wage of 2% (5% - 3%) per year.
However, it turned out that inflation was 5% per year. This means that real wages were actually 0% (5% - 5%). There was no increase in real wages at all. So, they received lower real wage (actually nil) as against expected real wage of 3% per year.
Answer
Miguel must set aside $62,745 annually
Explanation
N = Number of years till Miguel would retire = 43 years
FV = Future Value = $1,000,000
r = Interest rate = 10%
PMT = Annual payments (at the ending of the year) = ?? The question asks us to calculate this
We would use the future value ordinary annuity formula to calculate PMT
FV = PMT
1000000 = PMT
PMT ≅ $62,745
Miguel must set aside $62,745 annually