If actual inflation turns out to be greater than people had expected, then
A) No redistribution occurred.
B) Wealth was redistributed to lenders from borrowers.
C) The real interest rate is unaffected.
D) Wealth was redistributed to borrowers from lenders.

Question

Quizplus · Accepted Answer

When actual inflation is higher than expected, the real interest rate is lower than anticipated, benefiting borrowers who repay loans with money that is worth less than expected, thus redistributing wealth from lenders to borrowers.

If Actual Inflation Turns Out to Be Greater Than People