which of the following is most likely to be of benefit to a debtor

Analyze the question: It asks which economic condition is most likely to benefit a debtor, which is someone who owes money.

Concept: What matters to a debtor is the real value (purchasing power) of the money they must repay.

• Inflation is a general, persistent rise in prices, which means money loses purchasing power.
• Deflation is a general fall in prices, which means money gains purchasing power.

Step-by-step solution:

1. Suppose a debtor borrows ₦100,000 when ₦1,000 buys 10 bags of rice.
2. During inflation, prices rise. When it is time to repay, the ₦100,000 buys much less than before. The debtor repays the same nominal amount, but it is worth less in real terms. The lender loses and the debtor gains.
3. During deflation, prices fall. The ₦100,000 now has greater purchasing power, so the debtor effectively repays more in real terms. This hurts the debtor and favours the creditor.
4. Revaluation is an official increase in the value of a currency against foreign currencies under a fixed exchange rate. It mainly affects international trade (it makes imports cheaper and exports dearer). It has no direct link to the real burden of domestic debt.
5. Monetization is the conversion of something into money or legal tender, or the process of money becoming the medium of exchange. It has no direct effect on debtors' repayment burden.

Answer: Inflation benefits the debtor because they repay with money that has lost value. The correct option is A.

Exam tip: Remember "Inflation helps I owe", meaning debtors gain from inflation, while creditors (lenders) and people on fixed incomes lose. For deflation, it is the other way round.