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      Question

      Assertion (A): Inflation benefits creditors more than

      debtors. Reason (R): During inflation, the value of money decreases, and the real value of debt repayments also falls.
      A Both A and R are true, and R is the correct explanation of A. Correct Answer Incorrect Answer
      B Both A and R are true, but R is not the correct explanation of A. Correct Answer Incorrect Answer
      C A is false, but R is true. Correct Answer Incorrect Answer
      D A is true, but R is false. Correct Answer Incorrect Answer

      Solution

      Inflation benefits debtors because the real value of repayments decreases over time. Creditors lose purchasing power, making the assertion false but the reason true.

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