Question

Considering its costs and causes, who do you think are inflation's biggest victims? Who does inflation hit the hardest? The poorer households or the richer households? Why? explain in 200 words and in your own words.

Answer 1

inflation means increase in price or decrease in the value of money. the increase in price decreases the purchasing power of money so during inflation we get less goods or services with the unit of money as compare to the less inflationary period. inflation create several negative effects on our economy as it increases our cost of living. inflation is caused by the increase in money supply in the economy.the biggest victims of inflation are low wage earners, creditors, poor households etc. as the value of money decreases so they get less goods or services from their available income. the money creditors get back have less value than the money had given to the debtors so they incur huge loss.

inflation hit hardest to the poor households as their income is low and with the rise in prices of goods and services it becomes difficult for them to manage their standard of living. the rich households does not get affected much as their income is high but poor households are low earners so inflation increases their cost of living and reduces their living standard and their savings also decreases as they have to spend more on consumption