Inflation,the rate of change of average prices in the economy,generally
A)benefits creditors if it is unanticipated.
B)has no real effects if it is unanticipated.
C)increases the purchasing power of money.
D)reduces the real value of existing nominal debt.
E)increases the real value of fixed money incomes.

Question

Quizplus · Accepted Answer

Inflation reduces the real value of existing nominal debt, as the purchasing power of money decreases over time, and thus the amount of debt owed becomes less valuable in real terms. This can benefit borrowers who owe money, but it is detrimental to creditors who are owed the money.

Inflation,the Rate of Change of Average Prices in the Economy,generally