ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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individuals who work for minimum wage
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retirees who are getting a fixed income pension
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farmers who have borrowed money at fixed interest rates
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banks who have loaned their excess reserves at fixed interest rates
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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: -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-3: -Unanticipated inflation occurs when the general price level changes unexpectedly. Those who are retired or on a fixed income seem to take the hardest hit, as well as those institutions that offer loans.
Detailed explanation-4: -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.