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Changes in the level of prices have very serious consequences. 1_______. When prices rise, their money can buy much less than before. All creditors also suffer, because when they gave the loan, money had a higher value, and at the time of repayment the value of money is reduced. 2_______. Rising price level has a good effect on trade and industries, because as prices rise, businessmen earn higher profits. All those whose income changes with prices are benefitted. 3_______. Falling price level, on the other hand, benefits the fix income group of people, creditors, and all those who have money saved, because when the prices fall, their money becomes more valuable. 4_______. It is also harmful to debtors, because they have to repay debts at a higher value of money.
When the value of money falls, all those people whose incomes are fixed in terms of money, suffer a great loss
All those who have saved money in the past also suffer likewise, because the real value of their savings is reduced
The debtors also benefit when prices rise, because at the time of repayment of their debts, they pay money at its reduced value
Falling prices are bad for trade and industry, because as the prices fall they incur losses