Luke has lent his friend Mitch some money. However he underestimated the rate of inflation when they agreed to a repayment and interest schedule. Mitch will benefit from the inflation.

Question

Quizplus · Accepted Answer

If inflation occurs, the value of money decreases over time. Therefore, the amount of money Mitch borrowed will be worth less when it comes time to repay Luke. This means Mitch will benefit from the inflation, as he will have to repay Luke with money that is worth less than what he borrowed.

Luke Has Lent His Friend Mitch Some Money