If you take out a bank loan prior to unanticipated inflation
A) it will be harder for you to repay the loan because of the inflated dollar.
B) you will gain at the expense of your bank.
C) your bank will gain at your expense.
D) neither you nor your bank will be affected, because the loan was made prior to the inflation.

Question

Quizplus · Accepted Answer

Inflation reduces the real value of money over time, meaning that the dollars you repay in the future are worth less than the dollars you borrowed. If you take out a loan and then experience unanticipated inflation, the amount you repay is effectively less in real terms than the amount you borrowed, benefiting you at the expense of the bank.

If You Take Out a Bank Loan Prior to Unanticipated