1. Who is hurt and who is helped by inflation? Helped or Hurt

2. In Summary (write this down!)  Individuals who receive fixed incomes are HURT by inflation Lenders and savers  People who make fixed payments are HELPED borrowers

3. 1. Banks extend many fixed-rate loans. (think of Bernie the bank owner)  HURT The money the bank receives for the loan repayment will be less in real terms (purchasing power) than the loan amount.

4. 2. A farmer buys machinery with a fixed-rate loan to be repaid over a 10 year period.  HELPED Farmer makes payments that are less in real terms than the loan amount.

5. 3. A family buys a new home with an adjustable-rate mortgage that is above the rate of inflation. (Think of Jerome)  HURT The amount you pay each month will increase as inflation increases.

6. 4. A widow lives entirely on income from a fixed-rate pension. (Think of Helga)  HURT The purchasing power of the income will be less as inflation continues to deflate the value of the dollar.

7. 5. A retired couple lives entirely on income from a pension the woman receives from her former employer that includes a cost of living adjustment (COLA) thought her union. (Think of Theresa)  HELPED The purchasing power of the pension payment will be higher then the inflation rate because of the COLA.

8. 6. The federal government has a five billion dollar debt.  HELPED The government will repay the debt with money that has less purchasing power.

9. 7. A firm signs a contract to provide maintenance services at a fixed rate for the next 5 years.  HURT Revenue from contract will be worth less.

10. 8. Your friend rents an apartment with a 3 year lease.  HELPED Rent payments will remain the same even if prices go up.