If you expect that the inflation rate is 5 percent and the actual inflation rate turned out to be exactly 5 percent, then:
A) lenders gain.
B) borrowers gain.
C) both the borrowers and lenders gain.
D) neither borrowers nor lenders gain.

Question

Quizplus · Accepted Answer

When the actual inflation rate matches the expected inflation rate, neither the borrowers nor the lenders gain any advantage or disadvantage. It means that the inflation assumption made at the time of loan agreement was correct, and therefore, no party gains or loses.

If You Expect That the Inflation Rate Is 5 Percent