Inflation is among the phenomena that draw immense interest because of the tremendous impact that it has on an economy. When a country experiences inflation, it witnesses a sustained and significant increase in the prices of commodities. While there are some parties who gain from the price increases, there are others who witness adverse impacts. Debtors and shareholders are among those who gain as a result of inflation (Baumol & Blinder, 2008). The gain that the shareholders enjoy occurs in the form of increased profits resulting from the higher prices. Debtors gain by using the borrowed amount during moments when the amount had greater purchasing power. Owing to inflation, the amount that the debtors repay loses some of its purchasing power. Creditors and those earning fixed incomes are among the people who are hurt by inflation. The value amount that the creditors receive pay in repayment of the loans that they have issued is eroded by inflation. The salaries that fixed income earners receive are unable to keep up with the increase in prices. Essentially, these individuals have to purchase products at higher prices while their salaries remain unchanged.
References
Baumol, W. J., & Blinder, A. S. (2008). Macroeconomics: principles and policy. Boston: Cengage Learning.
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