An unanticipated increase in inflation will:
A)redistribute income from employers to workers.
B)redistribute income from lenders to borrowers.
C)redistribute income from borrowers to lenders.
D)do none of the above.

Question

An unanticipated increase in inflation will:
A)​redistribute income from employers to workers.
B)​redistribute income from lenders to borrowers.
C)​redistribute income from borrowers to lenders.
D)​do none of the above.

Quizplus · Accepted Answer

An unanticipated increase in inflation will cause lenders to lose purchasing power as the value of the money they receive in repayment decreases. Borrowers, on the other hand, will benefit as the amount they owe remains fixed, but the value of the money they use to make repayments decreases. Therefore, an unanticipated increase in inflation will redistribute income from lenders to borrowers.

An Unanticipated Increase in Inflation Will