Answer to Question #137206 in Macroeconomics for December

Question

47. Which one of the following is NOT an effect of higher inflation?
[1] Redistribution of wealth from the lender to the borrower.
[2] A decrease of the real value of existing savings.
[3] An increase in the standard of living.
[4] An increase in the cost of living.

Answer 1

nswer

 [3] An increase in the standard of living.

Explanation

Inflation decreases the purchasing power but at the same time increasing the daily expenses. This might force people to be in debts with interest charges which will hurt them financially. The high cost of goods and services makes many people not to afford them but sometimes they will have no option but to strain and buy them. This then affects their standards of living