Suppose that at the end of a given year there has been unanticipated inflation of 4 percent. Who is better off at the end of the year?
A)a consumer who lent money at the end of the year
B)a bank that lent money at the end of the year
C)a bank that lent money at the beginning of the year
D)a consumer who borrowed money at the end of the year
E)a consumer who borrowed money at the beginning of the year

Question

Quizplus · Accepted Answer

Unanticipated inflation benefits borrowers because they repay their loans with money that is worth less than when they borrowed it. A consumer who borrowed money at the beginning of the year benefits because the inflation was not anticipated, reducing the real value of the debt.

Suppose That at the End of a Given Year There