Which of the following statements is true?

Question

Quizplus · Accepted Answer

A) Inflation typically leads to higher nominal interest rates as lenders demand higher returns to compensate for the decreased purchasing power of money. B) is incorrect because unanticipated inflation actually redistributes wealth from creditors to debtors, as debtors can repay their loans with money that is worth less. C) is incorrect because inflation decreases, not increases, the purchasing power of households on fixed incomes. D) is incorrect because the simple money multiplier is the inverse of the reserve requirement, not the discount rate.

Which of the Following Statements Is True