Which of the following is most likely to be negatively affected by the deflation?

Q. Which of the following is most likely to be negatively affected by the deflation?

[A] An Individual who owes a big loan to the State bank of India

[B] A boy who has stored cash in almirah for last 6 months

[C] An Individual who has 1000 rupees in his bank account earning 1 percent interest every year.

[D] An elderly couple who receives 10000 rupees as pension every month

Answer: A

Notes:

Deflation hurts borrowers and benefits lenders. The amount that is repaid can buy more goods and services than when the loan was made. This increases the value of what a borrower must repay in real terms, even if the actual amount doesn’t change.

Savers benefit from deflation, even if they aren’t earning any interest.

The pensioners will gain from the deflation. The falling price level means that every month they will be able to buy more as prices continue to fall.

Source- Article

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