In the case of an unanticipated inflation: a) creditors with an unindexed contract are hurt because they get less than they expected in real terms. b) creditors with an indexed contract gain because they get more than they contracted for in nominal terms. c) debtors with an unindexed contract do not gain because they pay exactly what they contracted for in nominal terms. d) debtors with an indexed contract are hurt because they pay more than they contracted for in nominal terms.

A is the correct option.

Explanation:

The increase in the general price is known as inflation. This inflation occurs when people know that Inflation is going to occur and they start preparing for it. e.g In case of increased interest rates if the inflation is anticipated, the banks try to protect themselves by increasing the interest rates. There is also unanticipated inflation which occurs when people are unaware that inflation until the price level increases. In the case of unanticipated inflation, people are unprotected.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

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