Question

Identify several parties likely to be helped and hurt

by inflation.

Short answer

The inflation effect is on the whole economy because of its volatility.

Step-by-step solution

Step 1. Definition

Inflation is the rate at which prices increase over a period of time. Inflation is a broad measure, such as the increase in prices or the increase in the cost of living in a country.

Step 2. Explanation

Debtors, employers, borrowers, and the person whose income increases at a rate that is more than inflation are helped by inflation or they are on the positive side. This is because the debtors have to pay at a fixed interest while the prices are rising and employers get work done on the previous price.

While on the other side or on the negative side creditors, fixed income persons like pensioners and consumers are hurt by inflation. This is because creditors have to get an interest that is low as compared today and fixed income earners have on a negative side because goods become expensive.