Question

In a scenario in which the economy is experiencing unanticipated inflation (greater than 5% as measured by the CPI), who would suffer the least negative impact? A) A disabled veteran who cannot work due to injuries. B) A 70 year old widower living off of Social Security and savings. C) A local credit union that offers deposits, check cashing, and fixed rate auto loans and mortgages. D) A couple in their mid-30s who recently purchased a home with a fixed 30 year mortgage but are otherwise debt free.

Answer 1

D) A couple in their mid-30s who recently purchased a home with a fixed 30 year mortgage but are otherwise debt free.

Answer 2

The correct answer is the following: option D. A couple in their mid-30s who recently purchased a home with a fixed 30 year mortgage but are otherwise debt free would suffer the least negative impact of unanticipated inflation out of all the options provided.

Inflation is the economic term to describe the sustained increase on the price level of goods and service of a specific economy during a specific amount of time. This increase on the price of goods and services is reflected in a reduction of the purchasing capacity per unit of money that people posses.

Unemployed people, citizens that are living off Social Security benefits or savings, or businesses that work with offering check cashing or fixed rate loans are all going to feel the impact on the inflation because everything will be suddenly more expensive and they will have less spending capacity. Two people that live together, that are in their working ages and that are paying a fixed rate mortgage, will suffer less the impacts of the inflation compared to the previous group.