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

Business

Miley Reynolds

11 June, 01:21

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.

+3

Answers (2)

Know the Answer?

Allison · Answer 1

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

Nina Lambert · Answer 2

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).