Question

Which of the following groups are adversely affected by inflation?
(A) Wage earners in the informal sector.
(B) Profit earners.
(C) Salary earners with salaries indexed to inflation
(D) Pensioners with fixed pensions.
Select the correct answer using the codes given.

• A. (A) and (B)
• B. (C) and (D)
• C. (A) and (D)
• D. (B) and (C)

Answer 1

Answer: (C)

(A) and (D)

Inflation is an economic situation where the general price level in the economy for all the relevant goods has a constant appreciable rise over a period of time. The most adversely affected groups by inflation is usually the wage earners in the informal sector with a specific wage rate and pensioners with fixed pensions as their income remains the same but due to increase in the general price level their expenditure rises.