Winners and Losers in Hyperinflation

Steps:

• High inflation erodes the purchasing power of money over time.
• Debtors with fixed-rate loans repay with devalued currency, reducing real debt burden.
• Cash holders suffer as their savings lose real value rapidly.
• Evaluate options based on these inflation effects.

Why C is correct:

• Fixed-rate debtors win because inflation lowers the real value of debt (real interest rate = nominal rate - inflation rate, turning negative in hyperinflation).

Why the others are wrong:

• A: Firms selling goods win by raising prices, but debtor households win, not lose, from cheaper repayment.
• B: Firms unable to cut wages may benefit from falling real wages, but debtor firms win, not lose, on loans.
• D: Both fixed-wage workers and retirees lose as inflation cuts real income without adjustments.

Final answer: C