Effects of Inflation

Question 1

creditors (lenders)

Answer 1

loan money – always harmed by inflation because the money loaned loses values

Question 2

debtors (borrowers)

Answer 2

borrow money – always helped by inflation because the value of the dollars that they borrowed decreases, and the dollars they use to repay the debt are therefore easier to obtain

Question 3

savers

Answer 3

save money – can be harmed when the rate of inflation exceeds the interest rate they are paid on their savings, or they can be helped when their interest rate is greater than the rate of inflation

Question 4

creditors always hurt by inflation

Answer 4

money is worth less than before rising inflation

Question 5

most negatively affected by inflation

Answer 5

creditors

Question 6

if the interest rate is lower than the inflation rate, what happens for those who put money in a savings account?

Answer 6

savers lose

Question 7

if someone puts money into a saving account at 4% interest, but there is 6% inflation, what is the result

Answer 7

money in savings will lose 2% of its values

Question 8

which of the following is true if someone decides to borrow $1000 from a bank at 5% interest during a time period of 10% inflation

Answer 8

the debtor will wind up paying back

Question 9

true during a time of high inflation

Answer 9

borrow money