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8. Unanticipated inflation Unanticipated inflation penalises: A. those who hold cash B. those who lend money...

8. Unanticipated inflation Unanticipated inflation penalises: A. those who hold cash B. those who lend money at a fixed interest rate C. those earning incomes that are taxed in nominal terms D. those earning incomes that are taxed in nominal terms, those who hold cash and those who lend money at a fixed interest rate

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Answer #1

Those who hold more cash will be penalised because now the purchasing power has reduced and they would be abl;e to buy less goods than before.

Those who have lend at fixed ionterets will also be penalised with the unanticipated . also we know that real intereset rate is nominal - actual rate of inflation , so more the inflation , less will be the real interest rate.

The inflation of nominal incomes will put people in higher tax brackets beacuse income is taxed in nominal terms. So they would pay higher taxes

hence all three will be affected by unanticipated inflation . so option D is correct.

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