When unanticipated inflation occurs:
A)both creditors and debtors benefit.
B)both creditors and debtors are hurt.
C)debtors are hurt, but creditors benefit.
D)creditors are hurt, but debtors benefit.

Question

Quizplus · Accepted Answer

Unanticipated inflation erodes the real value of money. Creditors are hurt because the money they receive back is worth less than expected, while debtors benefit because they repay their loans with money that has less purchasing power.

When Unanticipated Inflation Occurs