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Chapter 9: Q. 30 (page 243)

Who in an economy is the big winner from inflation?

Short Answer

Expert verified

The big winner from inflation in an economy is the borrower and the government being the biggest borrower benefits the most from inflation.

Step by step solution

01

Step 1. Meaning of inflation.

Inflation is a general and ongoing rise in price levels in an economy.

02

Step 2. Big winner from inflation in the economy.

The big winner from inflation in an economy is the borrower and the government being the biggest borrower benefits the most from inflation.

The rise in inflation will lead to higher income but the loan to be repaid remains the same. So, with rising in income, the borrower can repay the loan in less amount of time and will be better off.

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Most popular questions from this chapter

Why is the GDP deflator not an accurate measure of inflation as it impacts a household?

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