Which of the following people would we expect to be hurt by an increase in the rate of inflation fro

Question:

Which of the following people would we expect to be hurt by an increase in the rate of inflation from 3 percent to 6 percent?

a).A homeowner with a $50,000 fixed-rate

mortgage on his home.

b).A retired person who receives a monthly

pension of $500 from her former employer.

c).An automobile worker with a cost-of-living

provision in his employment contract.

d).A wealthy individual who owns corporate

bonds that pay her an interest rate of

8 percent per year.

Which of the following people would we expect to be hurt by an increase in the rate of inflation from 3 percen

The correct answer is B.

A is wrong because the mortgage is fixed rate, so the monthly payments are unaffected by a rise in inflation.

C is wrong because the cost of living provision was specifically designed for situations where inflation (and, as logically follows, prices) increase.

D is not the most correct answer. This person%26#039;s real rate of return will decline as a result of the increase in inflation. But, the key word here is wealthy individual, which is what leads us to choose

B, because the person is on a fixed income (the monthly pension payment). Since the inflation rate rises from 3 to 6 percent, the person on the fixed income has seen their real purchasing power decrease.

Which of the following people would we expect to be hurt by an increase in the rate of inflation from 3 percen

c