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JAMB Economics 1991 Question 33

Question 33

Money and Inflation

An effect of inflation is that it

  1. A.discourages trade by barter
  2. B.favours debtors at the expense of creditors
  3. C.increases the real income of salary earners
  4. D.increases the value of a country's exports
Show the answer and explanation

Answer: B (favours debtors at the expense of creditors)

Explanation

When prices rise, money loses value, so debtors repay with money worth less than what they borrowed and creditors lose.