An inflation rate that is higher than expected benefits debtors.

Question

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Debtors are individuals or entities that have borrowed money and are required to pay it back with interest. When the inflation rate is higher than expected, the value of the money borrowed decreases, making it cheaper for debtors to repay their debts. This is because the loan amount remains the same while the value of money decreases, resulting in debtors paying back less in real terms than what they originally borrowed. Therefore, debtors benefit from a higher than expected inflation rate.

An Inflation Rate That Is Higher Than Expected Benefits Debtors