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9 November, 08:42

Suppose there is unexpected deflation this year that reduces the aggregate price level by 10%. how does deflation affect borrowers and lenders?

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  1. 9 November, 08:49
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    It would negatively affect bowers and lenders. First the dollar would be worth less which means it would buy less. This could effect interest rates to go up witch would cost borrowers more money. I believe banks wouldn't be able to loan as much money because there value would go down. Also the stock market would take a huge hit in my opinion. It would be bad all the way around
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