Borrowers benefit as inflation erodes real debt burden

Steps:

• Cost-push inflation arises from rising production costs, driving up prices and accelerating if unchecked.
• This erodes the real value of fixed nominal debts, easing repayment for borrowers.
• Consumers face reduced purchasing power from higher prices.
• Creditors receive payments worth less in real terms.
• Exporters may lose competitiveness if domestic costs rise faster than currency adjusts.

Why A is correct:

• Borrowers gain from inflation's wealth transfer effect, where real debt decreases while nominal payments stay fixed (per quantity theory of money implications).

Why the others are wrong:

• B: Consumers suffer directly from higher living costs squeezing real income.
• C: Creditors lose as repaid loans buy fewer goods due to devalued currency.
• D: Exporters worry about squeezed profit margins from elevated input costs harming global competitiveness.

Final answer: A