An individual would suffer lower losses or maybe even gain from an unexpectedly higher inflation rate if
A)she held much currency and on net was a lender.
B)she held much currency and on net was a borrower.
C)she held little currency and on net was a lender.
D)she held little currency and on net was a borrower.

Question

Quizplus · Accepted Answer

If an individual holds little currency and is on net a borrower, then they have borrowed money at a fixed interest rate. In the case of unexpectedly higher inflation, the purchasing power of the currency declines, which reduces the real value of the loan. As a result, the borrower could pay back the loan with less valuable currency, which effectively reduces the size of the loan in real terms. Thus, the borrower benefits from unexpectedly higher inflation rates.

An Individual Would Suffer Lower Losses or Maybe Even Gain