Which of the following results from unexpected increases in the rate of inflation?
A)Decreased uncertainty.
B)Increased windfall profits to creditors who have lent large amounts of money.
C)Redistributions of income and wealth between different groups.
D)Creditors are made better off.

Question

Quizplus · Accepted Answer

Unexpected increases in the rate of inflation can cause redistributions of income and wealth between different groups. This is because inflation reduces the purchasing power of money, leading to a decrease in the real value of assets and income. Those with fixed incomes or savings may see a decrease in their standard of living, while borrowers may benefit from paying back loans with cheaper dollars. This can lead to a redistribution of income and wealth between borrowers and lenders.

Which of the Following Results from Unexpected Increases in the Rate