ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Menu cost
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Shoe leather cost
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Cost for savers
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Fixed incomes
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Borrowers
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Detailed explanation-1: -During inflation the debtors gain and creditors lose.
Detailed explanation-2: -Key Takeaways. The investor is losing money if the inflation rate exceeds the interest earned on a savings or checking account. The Consumer Price Index (CPI) is the most popular way to measure inflation in the United States.
Detailed explanation-3: -People who have to repay their large debts will benefit from inflation. People who have fixed wages and have cash savings will be hurt from inflation.
Detailed explanation-4: -Inflation does affect the borrowing experience as financial institutions increase their lending rate during this time. As a result, you need to pay more towards the interest component. Further, in such a situation, you borrow when you have more purchasing power but repay when this purchasing power is less.