If expected inflation in a period exceeds actual inflation
A) borrowers will benefit.
B) savers will lose purchasing power.
C) SSUs will benefit at the expense of DSUs.
D) interest rates are likely to increase in the future.

Question

Quizplus · Accepted Answer

When expected inflation exceeds actual inflation, savers (SSUs) benefit because the real interest rate they receive is higher than anticipated, while borrowers (DSUs) pay more in real terms than expected.

If Expected Inflation in a Period Exceeds Actual Inflation