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Sagot :
Borrowers and lenders gains from inflation. The rate at which prices for goods and services rise is referred to as inflation. Inflation occurs when the price of goods and services rises broadly, causing the purchasing power of money to fall. Depending on the circumstances, inflation can benefit both borrowers and lenders.
Prices can be directly affected by the money supply; prices may rise as the money supply rises, assuming no change in economic output. Because they may repay lenders with money that is worth less than it did when they took out the loan, borrowers profit from inflation. Inflation-related price increases increase credit demand, which raises interest rates in lenders' favor.
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