What Does Inflation Have to Do with Wealth Redistribution

question 128

Multiple Choice

What does inflation have to do with wealth redistribution?

• A) Borrowing money has less cost, since you are paying the loan back with less purchasing power; wealth flows from lender to borrower.
• B) Loaning money has less cost, since you are receiving loan payments that have less value; wealth flows from borrower to lender.
• C) Since inflation is low, there is no impact of inflation on wealth redistribution.
• D) Lenders gain at the expense of borrowers.
• E) Pawn shops gain more at the expense of poor people.

---

Definitions:

Oligopoly

A market structure in which a few firms sell either a standardized or differentiated product, into which entry is difficult, in which the firm has limited control over product price because of mutual interdependence (except when there is collusion among firms), and in which there is typically nonprice competition.

Homogeneous Product

A product that cannot be distinguished from competing products from different suppliers.

Differentiated Product

A product that is made distinct from similar products offered by competitors through unique features, quality, branding, or other attributes.

Monopolistic Competitor's

A market structure where many firms sell products that are similar but not identical, each having some control over its price due to product differentiation.