If inflation were always perfectly anticipated and contracts were written in real terms, then
A)there would only be a transfer of wealth from debtors to creditors
B)there would only be a transfer of wealth from creditors to debtors
C)there would only be a transfer of wealth from the poor to the rich
D)there would only be a transfer of wealth from households to firms
E)currency holders would have a negative rate of return

Question

Quizplus · Accepted Answer

If inflation were always perfectly anticipated and contracts were written in real terms, the real value of debts and payments would be adjusted for inflation, preventing wealth transfers due to unexpected inflation. However, currency holders would still experience a negative rate of return because the purchasing power of their currency would decrease with inflation, even if it was anticipated.

If Inflation Were Always Perfectly Anticipated and Contracts Were Written