Deflation boosts real income for fixed earners

Steps:

• Deflation means a general fall in price levels, increasing money's purchasing power.
• Fixed income is nominal income that stays constant, like pensions or salaries.
• Real income equals nominal income divided by the price level.
• In deflation, lower prices raise real income without changing nominal amounts.

Why A is correct:

• Real income is nominal income adjusted for inflation/deflation; deflation (falling prices) increases purchasing power, so fixed earners gain real income.

Why the others are wrong:

• B: Indirect tax revenue depends on transaction volumes and rates, which may not fall proportionally in deflation.
• C: Producers dislike deflation as it cuts revenues and raises real debt burdens, preferring inflation for higher nominal sales.
• D: Savers gain real returns from standard savings in deflation; index-linked protects against inflation, not deflation.

Final answer: A