If the economy unexpectedly went from inflation to deflation,
A)both debtors and creditors would have reduced real wealth.
B)both debtors and creditors would have increased real wealth.
C)debtors would gain at the expense of creditors.
D)creditors would gain at the expense of debtors.

Question

Quizplus · Accepted Answer

In deflation, the value of money increases, so creditors gain as the real value of the money they are owed increases, while debtors lose as the real value of their debt increases.

If the Economy Unexpectedly Went from Inflation to Deflation