Inflation can lead to a redistribution of income and wealth within a society.Question 19Answera.Trueb.False

Analysis of the Statement

1. Understanding Inflation: Inflation refers to the general increase in prices of goods and services in an economy over time. This decrease in purchasing power can have various effects on different segments of society.

2. Redistribution of Income and Wealth:

   • When inflation occurs, individuals with fixed incomes (like pensions) tend to lose purchasing power, while those with assets that appreciate (like real estate or stocks) might benefit.
   • Borrowers can benefit from inflation if they repay loans with money that is worth less than when they borrowed it, effectively reducing the real value of their debt.
   • Conversely, lenders may lose because the money they are repaid is worth less.

Conclusion

Given the effects of inflation on different groups within the economy, it is accurate to say that inflation can lead to a redistribution of income and wealth within a society.

Final Answer

a. True