Which of the following best describes how the cost of unexpected inflation is distributed?
A)Unexpected inflation has a greater cost for those who borrow than those who save
B)Unexpected inflation has a greater cost for those who hold a little money than for those who hold a lot of money
C)Unexpected inflation has a greater cost for those whose wages increase by as much as inflation, than those who are paid a fixed nominal wage
D)Unexpected inflation has a greater cost for savers in high income tax brackets than for savers in low income tax brackets

Question

Quizplus · Accepted Answer

Unexpected inflation erodes the real value of savings, and those in high income tax brackets are more affected because their nominal interest income is taxed at a higher rate, reducing their real after-tax return.

Which of the Following Best Describes How the Cost of Unexpected