During an unanticipated inflation

Question

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During unanticipated inflation, the general price level increases at a faster rate than expected, reducing the purchasing power of money. The value of the money lent by creditors decreases, whereas that received by debtors remains stable. As a result, the real burden of debt decreases, and debtors can repay their loans with money that is worth less than when they took out the loan, making them better off. However, the opposite occurs for creditors, who receive less real value for the money lent. Thus, creditors are hurt, and debtors are helped during unanticipated inflation.

During an Unanticipated Inflation