ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Therefore, Debtors are the most benefitted from inflation.

Detailed explanation-2: -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.

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. Inflation is a situation where the money will be able to buy fewer goods than it was able to do so as the value of money comes down.

Detailed explanation-4: -Lenders are hurt by unanticipated inflation because the money they get paid back has less purchasing power than the money they loaned out. Borrowers benefit from unanticipated inflation because the money they pay back is worth less than the money they borrowed.

Detailed explanation-5: -Effect of Inflation on New Borrowers Again, during inflation, credit facilities with short tenures, such as credit card principal and personal loan, can be a little more cost-effective than loans with longer repayment periods. This is mainly because you borrow at a higher interest rate in times of inflation.