If inflation is positive and is perfectly anticipated
A)those that borrow money lose.
B)those that lend money lose.
C)those that hold paper money lose.
D)no one in the economy loses.
E)those who receive government benefits lose.

Question

Quizplus · Accepted Answer

Those that hold paper money lose because the value of their money erodes as prices increase. However, borrowers may benefit because they can repay their debts with money that is worth less and lenders can adjust their interest rates to account for inflation. Government benefits may also be adjusted for inflation, so it is not necessarily true that those who receive government benefits would lose.

If Inflation Is Positive and Is Perfectly Anticipated