Who is least likely to be hurt by unanticipated inflation?

• A. A retiree living on a fixed nominal pension
• B. A homeowner with a fixed-rate mortgage
• C. A worker on a long-term contract with a fixed nominal wage
• D. A lender who receives fixed nominal interest payments

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what unanticipated inflation means — it is inflation that occurs unexpectedly, so economic agents have set contracts or expectations based on lower inflation rates.
2. Step 2: Analyze the impact of unanticipated inflation on each group: retirees with fixed nominal pensions lose purchasing power because their income does not adjust with inflation.
3. Step 3: Consider workers on fixed nominal wages — their real wages decline with unanticipated inflation, reducing their purchasing power.
4. Step 4: Examine lenders who receive fixed nominal interest payments — inflation erodes the real value of the repayments they receive, so they are hurt by unanticipated inflation.
5. Step 5: Look at homeowners with fixed-rate mortgages — unanticipated inflation reduces the real value of their fixed nominal debt payments, effectively benefiting them or at least protecting them from harm.