With Unanticipated Inflation

question 69

Multiple Choice

With unanticipated inflation:

• A) creditors are hurt unless they have an indexed contract, because they get less than they expected in real terms.
• B) debtors with an indexed contract are hurt, because they pay more than they contracted for in nominal terms.
• C) debtors with an unindexed contract lose, because they pay exactly what they contracted for in nominal terms.
• D) creditors with indexed contracts gain, because they receive more than they contracted for in nominal terms.
• E) debtors with an indexed contract are hurt, because they pay more than they contracted for in real terms.

---

Definitions:

Depreciation Expense

The distribution of a physical asset's cost across its anticipated lifespan to reflect its depreciation over time.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue, also known as the bottom line.

Private Corporation

A company owned by non-governmental organizations or a relatively small number of shareholders or company members which does not offer or trade its company stock (shares) to the general public.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing shareholders' ownership in the company.