Question 21
Money and InflationWhich ONE of the following people is likely to gain from inflation?
- A.someone who is saving money by holding it in a cash box at home
- B.someone who has borrowed money at a fixed rate of home
- C.someone living on a pension which remains unchanged
- D.Monetarists who argue that an increase in money supply causes total spending to increase
Show the answer and explanation
Answer: B (someone who has borrowed money at a fixed rate of home)
Explanation
A debtor at a fixed rate repays with money that is worth less, so inflation helps him.