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) no change in the distribution of wealth between lenders and borrowers.
B) a net gain in purchasing power for lenders relative to borrowers.
C) a redistribution of wealth from borrowers to lenders.
D) a redistribution of wealth from lenders to borrowers.

Question

Quizplus · Accepted Answer

When inflation is higher than expected, borrowers repay their loans with money that is worth less than anticipated, effectively reducing the real value of the debt. This results in a redistribution of wealth from lenders to borrowers.

If the Rate of Inflation in a Given Time Period