If the anticipated rate of inflation is 3% but the subsequent actual rate of inflation is 5%, the likely outcome will be that the purchasing power of money will:
A)fall and lenders will benefit.
B)increase and borrowers will benefit.
C)fall and borrowers will benefit.
D)increase and lenders will benefit.

Question

Quizplus · Accepted Answer

When the actual rate of inflation exceeds the anticipated rate, the purchasing power of money decreases because each unit of currency buys fewer goods and services. Borrowers benefit in this scenario because they repay their loans with money that is worth less than expected.

If the Anticipated Rate of Inflation Is 3% but the Subsequent