If inflation turns out to be higher than people expected, wealth is redistributed to lenders from borrowers.

Question

Quizplus · Accepted Answer

When inflation is higher than expected, borrowers benefit because they repay their loans with money that is worth less than anticipated, effectively reducing the real value of their debt. Lenders, on the other hand, receive payments that have less purchasing power, resulting in a loss of wealth for them.

If Inflation Turns Out to Be Higher Than People Expected