Which of the following groups would benefit most in real terms from a period of high and unanticipated inflation,as was experienced in Canada in the early 1970s?
A)mortgage companies and banks who issued fixed-rate mortgages to clients
B)banks with outstanding loans to their customers
C)seniors whose income is largely interest earnings on past savings
D)firms that maintain large cash balances for the operation of their business
E)homeowners who had long-term fixed-rate mortgages

Question

Quizplus · Accepted Answer

Homeowners with long-term fixed-rate mortgages benefit from high and unanticipated inflation because the real value of their mortgage payments decreases. The fixed payments become less burdensome as the general price level rises, effectively reducing the cost of their debt in real terms.

Which of the Following Groups Would Benefit Most in Real