5A Chapter 2 Inflation rate

Question 1

During inflation, which of the following will gain or lose?
(a) Mrs. Chan, who received a fixed amount of Comprehensive Social Security Assistance every month
(b) Miss Lee, who had to repay a fixed amount of bank loan to a commercial bank
(6 marks)

Answer 1

(a) Mrs. Chan would lose.
The real value of the fixed amount of Comprehensive Social Security Assistance decreased during unanticipated inflation
(b) Miss Lee would gain.
The real value of the fixed amount of loan paid by Miss lee decreased during unanticipated inflation