Unanticipated negative inflation will create
A)losses for creditors and gains for debtors.
B)losses for both creditors and debtors.
C)gains for both creditors and debtors.
D)gains for creditors and losses for debtors.

Question

Quizplus · Accepted Answer

Negative inflation, or deflation, increases the real value of money. This means that the amount of money being repaid by debtors has more purchasing power than anticipated. Consequently, creditors gain because they receive money that is worth more, while debtors lose because they have to pay back money that is more valuable than when they borrowed it.

Unanticipated Negative Inflation Will Create