If the inflation rate is lower than expected,real income is redistributed from borrowers to lenders.

Question

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When the inflation rate is lower than expected, the purchasing power of borrowed money is higher, meaning borrowers can repay their loans with less valuable money. This leads to a redistribution of real income from borrowers (who now have to repay their loans with relatively more valuable money) to lenders (who receive repayments in relatively more valuable money).

If the Inflation Rate Is Lower Than Expected,real Income Is