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World geography miscellaneous

  1. Which of the following groups suffer the most from inflation?
    1. Debtros
    2. Creditors
    3. Business class
    4. Holders of real assets
Correct Option: B

Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal). Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power. Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed. In this way, one pays back less in real terms than one had borrowed. Those who may benefit from higher inflation are people with significant debt.



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