If the rate of inflation in a given time period turns out to be higher than lenders and borrowers anticipated, then the effect will be:
A) a redistribution of wealth from borrowers to lenders.
B) a net gain in purchasing power for lenders relative to borrowers.
C) no change in the distribution of wealth between lenders and borrowers.
D) none of the above.

Question

Quizplus · Accepted Answer

Higher than anticipated inflation erodes the real value of money, benefiting borrowers who repay loans with money that is worth less than expected, and disadvantaging lenders who receive payments with reduced purchasing power.

If the Rate of Inflation in a Given Time Period