An unexpected disinflation benefits lenders and harms borrowers.

Question

Quizplus · Accepted Answer

In an unexpected disinflation, the value of money increases, which means that lenders who have already lent money at a higher interest rate benefit because they will receive payments in higher value money. On the other hand, borrowers who have borrowed money at a higher interest rate will have to pay it back in higher value money, which they may not have anticipated, causing them harm.

An Unexpected Disinflation Benefits Lenders and Harms Borrowers