Consider the following statements :
- Inflation benefits the debtors.
- Inflation benefits the bondholders.
Which of the statements given above is/are correct?
Detailed Explanation:
✅ Statement 1 – Correct: Inflation erodes the real value of money. Debtors repay loans with money that has less purchasing power than when borrowed, reducing their real debt burden.
❌ Statement 2 – Incorrect: Bondholders receive fixed nominal payments. During inflation, the real value of these payments falls, causing bondholders to lose purchasing power.
Question 1 of 2 Causes and Effects of Inflation
Practice PYQ questions from this topic across all years
First question in this topic
A rise in the general level of prices may be caused by: an increase in the money s...