If the rate of inflation in a given time period turns out to be higher than lenders and borrowers anticipated, then the effect will be:
A) a redistribution of wealth from borrowers to lenders.
B) a net gain in purchasing power for lenders relative to borrowers.
C) no change in the distribution of wealth between lenders and borrowers.
D) that the borrow will be a winner.

Question

Quizplus · Accepted Answer

When inflation is higher than anticipated, borrowers benefit because they repay their loans with money that is worth less than expected, effectively reducing the real value of their debt.

If the Rate of Inflation in a Given Time Period