When the inflation rate ends up being lower than expected,
A)everyone benefits because money is cheaper.
B)everyone benefits because prices do not increase.
C)lenders of fixed rate mortgages generally benefit because they will make higher profits than they had calculated.
D)borrowers with fixed rate loans will benefit because their purchasing power will not decline as much.

Question

Quizplus · Accepted Answer

When the inflation rate ends up being lower than expected, borrowers with fixed rate loans will benefit because the value of their debt does not decrease as much as it would have with higher inflation rates. Their purchasing power remains relatively high.

When the Inflation Rate Ends Up Being Lower Than Expected