Q: 91 (IAS/2013)
question_subject:
Economics
question_exam:
IAS
stats:
0,155,135,155,48,59,28
keywords:
{'debtors': [0, 0, 1, 1], 'bond': [0, 0, 2, 4], 'inflation': [0, 1, 0, 3], 'holders': [0, 0, 0, 2]}
The correct statement is:
1. Inflation benefits the debtors.
Inflation erodes the value of money over time, which means that debtors can repay their debts with money that has a lower real value. This can be advantageous for debtors as they effectively pay back less in real terms. On the other hand, inflation is generally unfavorable for bond-holders, as the fixed interest payments they receive become worth less in real terms. So, statement 2 is incorrect.