Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. if the actual inflation rate at the end of the year is 2%: people on a fixed income see the purchasing power of their incomes rising. creditors gain at the expense of debtors. debtors gain at the expense of creditors. there is a redistribution of income from creditors to debtors.

Leading guitar string producer wound up inc. has enjoyed a competitive advantage based on its proprietary coating that gives its strings a clearer sound and longer lifespan than uncoated strings. one of wound up's competitors, however, has recently developed a similar coating using less expensive ingredients, which allows it to charge a lower price than wound up for similar-quality strings. wound up's competitive advantage is in danger due to a. a lack of perceived value b. a lack of organization c. direct imitation and substitution d. resource immobility