Chapter 3R, Problem 22MCQ

To determine

The question requires us to identify the agent who loses from the unanticipated inflation.

Explanation of Solution

Lenders, savers, and individuals with fixed incomes are hurt by the unanticipated inflation because it reduces the real value of the money they will get in the future.

For example, an individual on a fixed income is earning $1000 today and the inflation rate is 3% in the market. When inflation increases to 6%, the individual is going to earn the same income which indicates the lower real value of his income in the future.

So, a person on a fixed income loses from unanticipated inflation.

Thus, option “e” is correct.

Economics Concept Introduction

When the general price level rises at a faster pace than expected, the inflation is termed unanticipated inflation.