If you expect that the inflation rate is 5 percent and the actual inflation rate turned out to be exactly 3 percent, then:
A) lenders gain.
B) borrowers gain.
C) both the borrowers and lenders gain.
D) neither borrowers nor lenders gain.

Question

Quizplus · Accepted Answer

When the actual inflation rate is lower than expected, lenders gain because the real value of the money repaid by borrowers is higher than anticipated.

If You Expect That the Inflation Rate Is 5 Percent