Under which of the following conditions is wealth distributed from creditors to debtors?
A)when inflation is high, whether it is expected or not
B)when inflation is low, whether it is expected or not
C)when inflation is unexpectedly high
D)when inflation is unexpectedly low

Question

Quizplus · Accepted Answer

When inflation is unexpectedly high, creditors lose the real value of the money they have lent out, while debtors will still be paying back the same nominal amount of money, leaving them better off. This results in a redistribution of wealth from creditors (lenders) to debtors (borrowers).

Under Which of the Following Conditions Is Wealth Distributed from Creditors