Assume that for a given year, the nominal interest rate is 9 percent while inflation rises to 11 percent indicating a 4 percent higher rate than anticipated.Which group of people is made better off by the inflation?
A)Those who lend at fixed interest rates
B)Those who borrow at fixed interest rates
C)Those who borrow at variable interest rates
D)Those who receive fixed incomes
E)Those who save at variable interest rates

Question

Quizplus · Accepted Answer

Borrowers at fixed interest rates benefit because they repay their loans with money that is worth less than anticipated, effectively reducing the real cost of their debt.

Assume That for a Given Year, the Nominal Interest Rate