All of the following are true for unanticipated inflation EXCEPT
A) those on a fixed income lose purchasing power during inflationary periods.
B) creditors do not receive the full purchasing power from a loan because the principle and interest rate are fixed.
C) debtors are hurt during inflationary times because the amount they pay creditors back increases.
D) increased prices due to high inflation cause consumers to spend less money.

Question

Quizplus · Accepted Answer

Debtors actually benefit during inflationary times because the real value of the money they repay is less than the value of the money when they borrowed it. This means they pay back less in terms of purchasing power.

All of the Following Are True for Unanticipated Inflation EXCEPT