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.

Haley photocopying purchases a paper from an out-of-state vendor. average weekly demand for paper is 150 cartons per week for which haley pays $15 per carton. in bound shipments from the vendor average 1000 cartoons with an average lead time of 3 weeks. haley operates 52 weeks per year; it carries a 4-week supply of inventory as safety stock and no anticipation inventory. the vendor has recently announced that they will be building a faculty near haley photocopying that will reduce lead time to one week. further, they will be able to reduce shipments to 200 cartons. haley believes that they will be able to reduce safety stock to a 1-week supply. what impact will these changes make to haley’s average inventory level and its average aggregated inventory value?