If the rate of inflation in a given time period turns out to be lower than lenders and borrowers anticipated, then the effect will be:
A) a redistribution of wealth from borrowers to lenders.
B) a redistribution of wealth from lenders to borrowers.
C) a net loss in purchasing power for lenders relative to borrowers.
D) a net gain in purchasing power for borrowers relative to lenders.

Question

Quizplus · Accepted Answer

When inflation is lower than expected, borrowers repay loans with money that is worth more than anticipated, benefiting lenders and resulting in a redistribution of wealth from borrowers to lenders.

If the Rate of Inflation in a Given Time Period