Denny Y.

asked • 01/03/15

Need help with inflation / interest rate problem?

I was doing a homework problem on how inflation would affect savers and borrowers, but I don't get how savers would be hurt if they receive a fixed-interest-rate. Suppose that I'm a saver and have $100 in my bank and getting 5% interest payed to me, there is a 20% inflation, how would that hurt me? Inflation causes prices to go up, but my interest rate won't change if it is fixed?? I'm confused, somebody help me please!

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