Suppose people expect inflation to rise 3 percent but it act

Suppose people expect inflation to rise 3 percent but it actually increases by 7 percent. Will the following groups be better off or worse off? Can you please explain?

1. Banks that made large amounts of loans.

2. Students with student debt.

Solution

inflation means the rise in the price levels of all commodities in the market

Now the given Conditions are

Banks that made large amount of Loans: If the inflation is increasing then in similar way the wage of an individual should also increase if not,then the lenders can get much intrest because the people those who are borrowing will have less to save and i will take much time to repayback their amount

Students with student Debt:The same kind of logic can be applied here also if the stdent earnings are more then at the time of inflation then this can be a added advantage to the student because the student has taken a certain amount which now can be easily paid because they have additional money with them now.