In the Case of an Unanticipated Inflation

question 112

Multiple Choice

In the case of an unanticipated inflation:

• A) creditors with an unindexed contract are hurt because they get less than they expected in real terms.
• B) creditors with an indexed contract gain because they get more than they contracted for in nominal terms.
• C) debtors with an unindexed contract do not gain because they pay exactly what they contracted for in nominal terms.
• D) debtors with an indexed contract are hurt because they pay more than they contracted for in nominal terms.

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Definitions:

Bundle

A bundled package consisting of various products or services sold as one unit.

Preferences

In economics, a description of the needs or desires that consumers use to make choices among different goods or services.

Indifference Curves

Graphical representations used in microeconomics to show combinations of two goods that provide the same level of utility to a consumer.

Preferences

Individual tastes or choices regarding various alternatives, shaped by factors like utility, satisfaction, and economic conditions.