Asked by Jesse Gonzalez on Jul 27, 2024

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If the Fed were to unexpectedly increase the money supply, creditors would gain at the expense of debtors.

Money Supply

The sum quantity of financial assets in an economy at a particular instant.

Creditors

Individuals or institutions that lend money or extend credit to others, expecting repayment in the future.

Debtors

Individuals or entities that owe money to others.

  • Learn the repercussions of inflation and deflation on economic activities, especially in terms of interest rates and the power to buy.
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LR
Larissa RamdialJul 31, 2024
Final Answer :
False
Explanation :
When the Fed unexpectedly increases the money supply, it typically leads to inflation or a decrease in the value of money, which benefits debtors as they can repay their loans with money that is worth less. Creditors, on the other hand, lose because the value of the repayments they receive has decreased.