Unexpected inflation redistributes income:
A)away from workers with cost-of-living adjustments, benefiting employers.
B)away from renters, benefiting landlords.
C)away from poor people, benefiting the rich.
D)away from people with fixed incomes, benefiting people with fixed costs.
E)away from debtors, benefiting creditors.

Question

Quizplus · Accepted Answer

Unexpected inflation causes the prices of goods and services to rise, making it more expensive for people with fixed incomes to make ends meet. For example, retirees relying on fixed pension payments or social security benefits would be hurt by unexpected inflation because they would have less purchasing power as the prices of goods and services rise. On the other hand, people with fixed costs such as property owners would benefit from unexpected inflation because the value of their assets (i.e., real estate) would increase, allowing them to charge higher rents, for example. Therefore, unexpected inflation typically redistributes income from people with fixed incomes to those with fixed costs, such as property owners.

Unexpected Inflation Redistributes Income