Question

What are the effects of inflation on various groups of society?

Answer 1

Inflation harms all levels in society:

Debtors and Creditors: The debtors are the gainers during inflation while the creditors are the losers.

Wages and salary earners: They are the losers because their salaries do not rise in the same proportion as the rise in the cost of living. Thus they purchasing power and spending capacity too falls.

Fixed income groups: They suffer most during inflation. Their money income remains fixed while the prices of goods is increasing.

Entrepreneurs: They are the gainers because the cost of production does not rise as rapidly as prices of the products. Thus they produce at low costs and their revenue and profit increases.

Farmers: They are the gainers because the farmers are generally debtors and they repay less purchasing power to the creditors.

Investors: The investors who invest in equity shares are the gainers but those who invest in fixed interest yielding bonds and debentures are the losers.