If the actual inflation rate is less than the expected inflation rate:
A) lenders gain and borrowers lose.
B) borrowers gain and lenders lose.
C) everyone benefits.
D) everyone is worse off.

Question

Quizplus · Accepted Answer

When the actual inflation rate is less than the expected inflation rate, lenders gain because the real value of the money they are repaid is higher than anticipated. Conversely, borrowers lose because they repay money that is worth more in real terms than they expected.

If the Actual Inflation Rate Is Less Than the Expected