Inflation can affect the distribution of income because
A. people with fixed incomes, such as retired persons who may be receiving a pension of a fixed number of dollars each year, are not affected by the inflation rate, but people with varying incomes are.
B. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power.
C. when inflation is fully anticipated, mortgage lenders face very high default risk.
D. people with incomes rising slower than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more quickly than the rate of inflation are hurt by a decreasing purchasing power.
Answer: B. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power.