Who would benefit from inflation and who from deflation?

Answer 1

Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal). Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power. Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed. In this way, one pays back less in real terms than one had borrowed. Those who may benefit from higher inflation are people with significant debt. Typically those most hard-hit are white-collar workers, teachers, pensioners, doctors, those on fixed incomes and those working for cash wages. These categories of people tend to have their wealth in savings, retirement funds and are, thus "creditors", whose future income will not be adjusted up as inflation rises. These people's incomes lag behind the speed of inflation making them poorer in irregular fits. Inflation, caused by a complex set of economic variables, is not a singular type of economic problem, however. It is typically compounded and exacerbated by other variables and there isn't a single way to address and stimulate its reduction. For example, it is assumed that in the short run inflation and unemployment are inversely correlated (the higher inflation, the lower unemployment; the higher unemployment, the lower inflation). However, the current economic situation in the US displays both a rise in unemployment and indications of progressively rising inflation expressed in rising commodities prices, reduced value of the dollar and the rise of gold as a safe haven for wealth. The different types of inflation are best discussed elsewhere. Deflation is the opposite of inflation- where there is a sustained general fall of prices of wages, goods and services. This is undesirable because it may lead to bankruptcies and it is usually caused by a sustained fall in aggregate demand. The winners/losers in this scenario reverse roles compared to the inflationary scenario (very simply speaking). Disinflation should not be confused with inflation. Disinflation is a reduction of inflation overtime.

Answer 2

There are so many people who will benefit from deflation. This will mainly benefit consumers as they will have more purchasing powers.

Answer 3

Probably the people who exchange their currency to a different currency before an inflation, then exchange that foreign currency back, therefore making a profit.