If inflation falls, people choose to put in
A)more effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from lenders to borrowers.
B)more effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.
C)less effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from lenders to borrowers.
D)less effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.

Question

Quizplus · Accepted Answer

When inflation falls, people are less inclined to spend their money quickly, leading to less effort to keep money balances low. Additionally, lower-than-expected inflation benefits lenders at the expense of borrowers because the real value of the money repaid is higher than anticipated.

If Inflation Falls, People Choose to Put in