Which of the following is FALSE, if an increase in the inflation rate cannot be perfectly anticipated?
A)there will be a redistribution of income and wealth
B)debtors will benefit while creditors will lose
C)the holder of an indexed government bond will lose
D)the government will gain real tax revenue
E)the real value of government debt will decline

Question

Quizplus · Accepted Answer

If the inflation rate cannot be perfectly anticipated, the holder of an indexed government bond will not necessarily lose because the bond is adjusted to compensate for inflation. In fact, they may still receive a return greater than the inflation rate. Therefore, statement C is false.

Which of the Following Is FALSE, If an Increase in the Inflation