Which of the following results from unexpected increases in the rate of inflation?
A)Decreased uncertainty.
B)Increased windfall profits to creditors who have lent large amounts of money.
C)Redistributions of income and wealth between different groups.
D)Creditors are made better off.

Question

Quizplus · Accepted Answer

Unexpected increases in the rate of inflation can lead to redistributions of income and wealth between different groups. Those who have fixed incomes, such as retirees, may see a decline in their purchasing power, while those who own real assets, such as property or stocks, may benefit from rising prices. Inflation can also widen the gap between the rich and the poor, as those with less ability to protect themselves from inflation may suffer the most. Choices A, B, and D are incorrect as they do not align with the effects of unexpected increases in the rate of inflation.

Which of the Following Results from Unexpected Increases in the Rate