Asked by Faith Granville on May 22, 2024
Verified
Which of the following would not be hurt by unanticipated inflation?
A) Those living on fixed nominal incomes
B) Those who find inflation rising more rapidly than their nominal incomes
C) Those who have money savings
D) Those who became debtors when inflation was lower
Unanticipated Inflation
Inflation that occurs when the rate of inflation exceeds what was expected, potentially leading to distortions in economic decisions and agreements.
Fixed Nominal Incomes
Incomes that are set at a certain level and do not change over time regardless of inflation or deflation. Such incomes do not adjust for changes in the cost of living.
Debtors
Individuals or entities that owe money to another party.
- Comprehend the correlation between inflation rates and its effects on lenders as well as borrowers.
Verified Answer
GC
Gabriel CababaoMay 26, 2024
Final Answer :
D
Explanation :
Those who became debtors when inflation was lower would not be hurt by unanticipated inflation as the inflation would decrease the real value of their debt. Inflation would reduce the purchasing power of the currency, making the amount borrowed worth less in real terms. As a result, the debtor would repay the loan with currency that is worth less than the currency borrowed, allowing them to pay off the debt with a reduced burden.
Learning Objectives
- Comprehend the correlation between inflation rates and its effects on lenders as well as borrowers.