Which of the following groups benefits from unexpected inflation?
A. Savers
B. Fixed-income earners
C. Borrowers
D. Minimum wage workers
Answer (2)
The correct answer is letter C. BorrowersBorrowers benefit from unexpected inflation because the money they repay is worth less than when they borrowed it. Let’s say a student borrows ₱1,000 from a friend to buy a bike. A year later, they repay the ₱1,000—but if inflation rose during that time, ₱1,000 can no longer buy as much as before. So in real terms, the borrower paid back less value.On a larger scale, people with housing loans or the government with debts can also benefit. For example, if inflation suddenly rises while someone has a loan with a fixed interest rate, they still pay the same amount—but their salary might have increased. They are repaying the loan with less valuable money.That’s why lenders and savers lose out—the money they lent or saved loses value. Inflation helps those who owe money but hurts those who are trying to save for the future.
The group that benefits from unexpected inflation is C. Borrowers.Unexpected inflation reduces the real value of money. Borrowers repay their loans with money that is worth less than when they originally borrowed it. This means they effectively pay back less in real terms, benefiting from the inflation.In contrast,Savers lose because their saved money loses purchasing power.Fixed-income earners suffer since their income doesn’t increase with inflation, reducing their real income.Minimum wage workers may not immediately see wage increases and thus also lose purchasing power.
