If Inflation Increases Unexpectedly, Then

question 147

Multiple Choice

If inflation increases unexpectedly, then:

• A)borrowers tend to lose.
• B)lenders tend to lose.
• C)lenders and borrowers tend to gain.
• D)neither borrowers nor lenders tend to lose.

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Definitions:

Consumption

The action of using goods and services to fulfill needs or desires; usually the largest component of GDP.

Saving

The portion of income not spent on current expenditures or consumables, often put aside for future use or investments.

Opportunity Cost

The penalty of bypassing the alternative that ranks second in preference while making a choice.

Investment

The process of distributing funds with the aim of earning returns or profits.