One effect of inflation is that

Step 1: Analyze the question The question asks for one effect of inflation. Inflation is a sustained rise in the general price level of goods and services over time.

Step 2: Explain the concept When prices rise, each naira buys fewer goods and services than before. So inflation reduces the purchasing power (value) of money. Example: if a bag of rice rises from ₦50,000 to ₦80,000, the same ₦50,000 can no longer buy a bag.

Step 3: Evaluate each option

• A. Money's purchasing power will increase. Wrong. This is the effect of deflation (falling prices), not inflation.
• B. The real incomes of workers will rise. Wrong. Real income is money income adjusted for price changes. If prices rise faster than wages, real income falls, especially for fixed-income earners such as pensioners and salary earners.
• C. Both borrowers and lenders benefit from it. Wrong. Inflation favours borrowers, because they repay with money that is worth less. It hurts lenders, because the money they get back buys less than what they lent. So both cannot benefit.
• D. Money's purchasing power will fall. Correct. This is the direct and defining effect of inflation.

Step 4: Answer The correct option is D.

Exam tip: Remember the pair: Inflation → prices up → value of money down. Deflation is the opposite. For options on "who gains and who loses," remember that inflation helps debtors/borrowers and hurts creditors/lenders and fixed-income earners. Avoid options that say "both" benefit, as they are usually traps.