When the expected rate of inflation is higher than the actual rate of inflation,wealth is:
A) redistributed at random.
B) not redistributed at all.
C) redistributed from borrowers to lenders.
D) redistributed from lenders to borrowers.

Question

Quizplus · Accepted Answer

When the expected rate of inflation is higher than the actual rate of inflation, lenders benefit because the real value of the money they are repaid is higher than anticipated. This results in a redistribution of wealth from borrowers to lenders, as borrowers end up paying back more in real terms than they had expected.

When the Expected Rate of Inflation Is Higher Than the Actual