Multiple choice

Which of the following peoples is most likely to benefit from an inflationary situation?

  1. A person who buys units from the Unit Trust

  2. A person who keeps his savings under the floor at home

  3. A person who makes a large private loan to a friend

  4. A person who takes out a mortgage with a building society
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Borrowers with fixed-rate debts benefit from inflation because the real value of their debt decreases over time. A mortgage represents a fixed nominal obligation, while inflation may increase the borrower's income and asset values, effectively reducing the real burden of repayment.

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