When actual inflation is less than expected inflation
A)borrowers lose and lenders gain.
B)borrowers gain and lenders lose.
C)borrowers and lenders both gain.
D)borrowers and lenders both lose.

Question

Quizplus · Accepted Answer

When actual inflation is less than expected inflation, the real interest rate is higher than anticipated. This benefits lenders, who receive more in real terms than expected, and harms borrowers, who pay more in real terms than anticipated.

When Actual Inflation Is Less Than Expected Inflation