If inflation is more than expected, how are creditors or debtors affected?
A) Creditors receive a lower real interest rate than they had anticipated.
B) Creditors pay a lower real interest rate than they had anticipated.
C) Debtors receive a higher real interest rate than they had anticipated.
D) Debtors pay a higher real interest rate than they had anticipated.

Question

Quizplus · Accepted Answer

When inflation is higher than expected, the value of the money repaid by debtors is less in real terms than anticipated, effectively reducing the real interest rate received by creditors.

If Inflation Is More Than Expected, How Are Creditors or Debtors