When unexpected inflation occurs, some people in society are harmed while other

Question

When unexpected inflation occurs, some people in society are harmed while other people are made better off Use the descriptions below to determine if they have benefited ("Winners") or have been harmed ("Losers") by unexpected inflation "Winners" "Losers" Herb, who keeps his savings in an old coffee can Karen, a retired school teacher that relies upon her fixed pension to pay for her expenses. 3rd National, a bank that loaned many people money for home purchases Joy, who has borrowed $40,000 to The U.S. federal government, pay for her college education. which had almost $15 trillion in debt in 2011

Explanation / Answer

Answer.)  Unexpected inflation always redistributes wealth from people who have contracted to receive fixed nominal amounts in the future to the people who have contracted to pay those fixed nominal amounts. Debtors become winners and creditors become losers in case of an unexpected inflation.

"Winners"
- Joy, who has borrowed $40,000 to pay for her college education.

- The U.S. federal government, which had almost $15 trillion in debt in 2011.

"Losers"
- Herb, who keeps his savings in an old coffee can.

- 3rd National, a bank that loaned many people money for home purchases.

- Karen, a retired school teacher that relies upon her fixed pension to pay for her expenses.

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