High and unexpected inflation has a greater cost

a. for those who save than for those who borrow.

b. for those who hold a little money than for those who hold a lot of money.

c. for those whose wages increase by as much as inflation than those who are paid a fixed nominal wage.

d. for savers in low income tax brackets than for savers in high income tax brackets.

Question

Whitney Sampson

Business

27 September, 14:13

High and unexpected inflation has a greater cost

a. for those who save than for those who borrow.

b. for those who hold a little money than for those who hold a lot of money.

c. for those whose wages increase by as much as inflation than those who are paid a fixed nominal wage.

d. for savers in low income tax brackets than for savers in high income tax brackets.

+1

Answers (2)

Know the Answer?

Taylor Novak · Answer 1

A) for those who save than for those who borrow.

Explanation:

For example, I borrow $50,000 at an 8% interest rate while my neighbor has a CD that pays him 4% yearly interest. If the inflation rate unexpectedly increases by 2%, then the real interest that I will pay will be 6% (I will pay less), while the real interest rate that my neighbor will get will be only 2% (he will earn less).

Simba · Answer 2

D. For savers in low income tax brackets than for savers in high income tax brackets.