Which of the following statements is true?
A)When unanticipated inflation occurs regularly, the degree of risk associated with investments in the economy decreases.
B)Inflation that is higher than expected benefits debtors and inflation that is lower than expected benefits creditors.
C)Inflation improves the balance of trade as exports appear relatively cheaper to overseas buyers and imports become relatively more expensive.
D)There are no costs or losses associated with inflation when it is fully anticipated.

Question

Quizplus · Accepted Answer

Inflation that is higher than expected benefits debtors because they can pay back loans with inflated dollars, which are worth less than when the loan was originally taken out. Inflation that is lower than expected benefits creditors because they can receive loan payments in more valuable dollars than they expected.

Which of the Following Statements Is True