If this year's inflation rate was lower than expected, then
A)a transfer of wealth from the poor to the rich would occur
B)the government would gain tax revenues unless it had an indexed tax system
C)lenders would gain at the expense of borrowers
D)borrowers would gain at the expense of lenders
E)nominal wage rates would increase

Question

Quizplus · Accepted Answer

When inflation is lower than expected, the real interest rate is higher than anticipated, benefiting lenders who receive more in real terms, while borrowers pay more in real terms than they planned.

If This Year's Inflation Rate Was Lower Than Expected, Then