Inflation erases the value of:
Which one is true-
a)Financial assets and financial liabilities.
b)Financial assets, but not financial liabilities.
c)Financial liabilities, but not financial assets.
d)Real assets, but not financial assets.
ANS
Option B. Financal assets , but not financial liabilities. The inflation erases the value of financial assets as the value of financial assets does not rise as same rate as the rate of inflation. The infllation does not erases the value of every financial liability as it erases the value of financial liability on fixed rate but not the one with floating interest rate. So it erases the value of financial assets but not financial liabilities.
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