Answers

  • Brainly User
2014-08-16T11:08:15+05:30

The correct statement is 1. Inflation benefits the debtors becoz inflation causes the purchasing power of money to decline, hence in real terms value of debt declines.

For ex: let a farmer borrows $10 to buy seeds of a plant hoping to make $20 out of that crop. Inflation kicks in and the farmer sells & harvests the crop for $50(instead of the expected $20). then instead of paying half of his income to pay the debt he only pays one-fifth of his income. So it is the debtor who eventually gets benefitted by inflation. 

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2014-08-16T12:02:17+05:30
THE CORRECT ANSWER IS OPTION 1.
1. Inflation benefits the debtors.
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