Under which condition is wealth distributed from creditors to debtors?
A) when inflation is high, whether it is expected or not
B) when inflation is low, whether it is expected or not
C) when inflation is unexpectedly high
D) when inflation is unexpectedly low

Question

Quizplus · Accepted Answer

When inflation is unexpectedly high, it can lead to an increase in the price of goods and services. This, in turn, can lead to an increase in the value of assets, including the value of debts owed by debtors. If the debts are fixed in value, the debtors benefit from paying back the debts with less valuable currency. This means that creditors, who are owed money, are effectively losing wealth because they are receiving repayment with currency that has decreased in value. As a result, wealth is distributed from creditors to debtors in this scenario.

Under Which Condition Is Wealth Distributed from Creditors to Debtors