Consider the following statements
1. Inflation benefits the debtors.
2. Inflation benefits the bond-holders.
Which of the statements given above is/are correct?
Both 1 and 2
Incorrect AnswerNeither 1 nor 2
Incorrect AnswerExplanation:
In inflation debtor gains and lender looses.
First statement is correct. Debtors gain from inflation because the value of money has gone down, and the debtors have to pay the same amount.
Second statement is incorrect i.e. Inflation benefits the bond-holders. A Bond holder has lent money and received bond in return.The amount he will recieve,its vlue will be lower now because of inflation.So, he suffers.
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By: Abhipedia