ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Landlords who won apartments in cities with rent controls
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Individuals who have fixed retirement incomes
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Individuals who have borrowed money at fixed interest rates
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Banks that have loaned all excess reserves at a fixed interest rate
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Detailed explanation-1: -Borrowers benefit from unanticipated inflation because the money they pay back is worth less than the money they borrowed.
Detailed explanation-2: -Who stands to gain as a result of unanticipated inflation? Debtors. an automatic increase in wages that takes into account increases in the price level.
Detailed explanation-3: -The most adversely affected groups by inflation is usually the wage earners in the informal sector with a specific wage rate and pensioners with fixed pensions as their income remains the same but due to increase in the general price level their expenditure rises.
Detailed explanation-4: -Inflation allows borrowers to pay lenders back with money worth less than when it was originally borrowed, which benefits borrowers. When inflation causes higher prices, the demand for credit increases, raising interest rates, which benefits lenders.