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8 January, 05:32

Inflation is most harmful to

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  1. 8 January, 06:05
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    Inflation is most harmful to the consumers. It can be beneficial for lenders or borrowers depending upon on the situation.

    Explanation:

    Inflation is harmful to consumers as the purchasing power of their income gets reduced. Those people who do not have their income indexed to inflation are harmed the most.

    If the wages increase with inflation the borrowers will be benefited the most. They will need to pay the same amount of money but their nominal income will be higher.

    When the wages do not increase with inflation, the creditors are benefited. This is because increased prices, in this case, will increase the demand for credit. The interest rate, as a result, will rise. This will benefit the creditors.
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