Digital PSAT Reading and Writing Practice Question 47: Answer and Explanation

Question: 47

While reading a social studies text about economics and inflation, a student takes the following notes:

■ Inflation involves an increase in the money supply.

■ Inflation is associated with increasing prices for goods and services.

■ Those who have fixed prices for their long-term debt payments may find inflation beneficial.

〇 Fixed debt payments will become relatively less expensive over time with inflation.

■ Those who are on fixed incomes may find inflation detrimental.

〇 Fixed income recipients may find their purchasing power decrease in an inflationary environment.

The student is doing a presentation in which she needs to create an example of a person who would most likely be harmed by inflation. Based on the notes, which of these examples would best accomplish the student's goal?

• A. A homeowner with fixed monthly mortgage payments
• B. A retiree on a pension with a set income every month
• C. A car owner who has $500 monthly payments until the car is fully paid off in five years
• D. A gardener who grows most of his food at home, thereby avoiding purchasing food at stores

Correct Answer: B

Explanation:

(B) The student wants to create an example of someone who is likely to be harmed by inflation. Based on the notes, someone who has fixed income payments would likely find inflation detrimental because their purchasing power would decrease over time. A retiree with a set income each month would fall under this description. It is not (A) or (C), because these represent fixed debt payments that would become relatively less expensive over time. It is not (D), because this person would not be significantly impacted by changes in the money supply since they do not need as much money to grow their own food as they would if they purchased the food at a store.