Which of the Following Is True of Unanticipated Inflation

question 14

Multiple Choice

Which of the following is true of unanticipated inflation?

• A) It hurts lenders because the purchasing power of the money they collect from their borrowers is now higher.
• B) It hurts borrowers because they repay their debts with money that is now worth more.
• C) It helps lenders because the purchasing power of the money they collect from their borrowers is now higher.
• D) It helps borrowers because they repay their debts with money that is now worth less.

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Definitions:

Cell A

In the context of matrices or spreadsheets, it typically refers to the top-left cell or the first cell in a table.

Compounded Annually

A method of calculating interest where the interest earned over a period is added to the principal, and the total becomes the basis for calculating interest in the next period, occurring once per year.

Positively Correlated

A relationship between two variables where both either increase or decrease together.

Negatively Correlated

A statistical relationship between two variables in which one variable increases as the other decreases.