In each of the following situations, explain whether borrowers or lenders are worse off, better off, or equally well off because of unexpected inflation.

a. Expected inflation one year ago was 4 percent; actual inflation over the year turned out to be 7 percent.

b. Expected inflation one year ago was 5 percent; actual inflation over the year turned out to be 3 percent.

c. The nominal interest rate on a loan was 8 percent; the expected real interest rate on the loan was 4 percent; actual inflation over the year turned out to be 3 percent.

d. The nominal interest rate on a loan was 8 percent; the expected real interest rate on the loan was 5 percent; actual inflation over the year turned out to be 3 percent.