Question

Observe the relationship of the first pair of words and complete the second pair.

During inflation the debtors gain and ______ lose.

विकल्प

• Creditors 

• Producers

• Businessman

• Shopkeeper

Answer 1

During inflation the debtors gain and creditors lose.

Explanation:

During inflation, debtors gain but creditors lose. When prices rise, the value of money (i.e., the purchasing power of money) falls. Though the debtors return the same amount of money, they pay less in terms of goods and services. The purchasing power of money was high when they had borrowed but low at the time of return. Thus, inflation helps the debtors. On the other hand, creditors stand to lose. Although they get back the same amount of money which they lent, they get less in terms of goods and services. Thus, there is a transfer of wealth from creditors to debtors.