During a period of unanticipated inflation, the group that is most likely to benefit is
A) debtors.
B) savers.
C) creditors.
D) retired individuals.

Question

Quizplus · Accepted Answer

During a period of unanticipated inflation, the value of money decreases while the price of goods and services increases, causing the cost of borrowing to become cheaper in real terms. This means that debtors who borrow at fixed rates of interest benefit because they have to repay the loan with money that has less purchasing power than the money they borrowed. Therefore, they can repay their debts with less valuable money, resulting in a decrease in the real value of their debt.

During a Period of Unanticipated Inflation, the Group That Is