What is a likely consequence of unexpected inflation for people with fixed incomes?
A. They gain purchasing power
B. They earn higher interest rates automatically
C. They lose purchasing power
D. Their salaries increase automatically
Answer (1)
The correct answer is letter C. They lose purchasing powerPeople on fixed incomes, like retirees or minimum wage earners, suffer during unexpected inflation because their earnings stay the same while prices rise. This means the money they receive every month buys less and less over time.For example, if a senior citizen in the Philippines receives ₱6,000 monthly as pension and the price of rice increases from ₱40 to ₱60 per kilo, the pension won’t stretch as far. They may have to cut down on food, medicine, or electricity just to survive.Unless their income is adjusted regularly (which is rare), they lose purchasing power—they have money, but it can’t buy what it used to. This is why inflation hits the poor and elderly the hardest.
