Answer to Question #299388 in Macroeconomics for Prit

Question

Inflation is unexpectedly higher than anyone anticipated. In this scenario would you rather

be a lender or a borrower?

Answer 1

However, a borrower is the one repaying the loan gains from the fact that the dollar value is worth less than was expected while as the unexpected high inflation leads to a loss.

The lender is therefore on receiving end since the real interest rate is lower than expected

and a decline on the rate leads to a lower purchasing power of the interest that the lender will receive.

Therefore I would rather be a BORROWER.