When actual inflation is less than expected inflation
A)the natural rate of unemployment falls, according to Phillips-curve analysis.
B)cyclical unemployment falls, according to Phillips-curve analysis.
C)there are transfers from borrowers to lenders.
D)there are transfers from lenders to borrowers.

Question

Quizplus · Accepted Answer

When actual inflation is less than expected inflation, borrowers benefit because they are paying back loans with dollars that have more purchasing power than expected. Lenders, on the other hand, lose because they receive dollars that have less purchasing power than expected. This leads to transfers from borrowers to lenders.

When Actual Inflation Is Less Than Expected Inflation