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Who is hurt and who is helped by inflation?

Who is hurt and who is helped by inflation?. Helped or Hurt. In Summary (write this down!). Individuals who receive fixed incomes are HURT by inflation Lenders and savers People who make fixed payments are HELPED borrowers.

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Who is hurt and who is helped by inflation?

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  1. Who is hurt and who is helped by inflation? Helped or Hurt

  2. In Summary (write this down!) • Individuals who receive fixed incomes are HURT by inflation • Lenders and savers • People who make fixed payments are HELPED • borrowers

  3. 1. Banks extend many fixed-rate loans. (think of Bernie the bank owner) • HURT • The money the bank receives for the loan repayment will be less in real terms (purchasing power) than the loan amount.

  4. 2. A farmer buys machinery with a fixed-rate loan to be repaid over a 10 year period. • HELPED • Farmer makes payments that are less in real terms than the loan amount.

  5. 3. A family buys a new home with an adjustable-rate mortgage that is above the rate of inflation.(Think of Jerome) • HURT • The amount you pay each month will increase as inflation increases.

  6. 4. A widow lives entirely on income from a fixed-rate pension. (Think of Helga) • HURT • The purchasing power of the income will be less as inflation continues to deflate the value of the dollar.

  7. 5. A retired couple lives entirely on income from a pension the woman receives from her former employer that includes a cost of living adjustment (COLA) thought her union. (Think of Theresa) • HELPED • The purchasing power of the pension payment will be higher then the inflation rate because of the COLA.

  8. 6. The federal government has a five billion dollar debt. • HELPED • The government will repay the debt with money that has less purchasing power.

  9. 7. A firm signs a contract to provide maintenance services at a fixed rate for the next 5 years. • HURT • Revenue from contract will be worth less.

  10. 8. Your friend rents an apartment with a 3 year lease. • HELPED • Rent payments will remain the same even if prices go up.

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