Which of the following economic phenomena redistributes income and wealth?

Inflation is a significant economic phenomenon that can lead to the redistribution of income and wealth within an economy. When inflation occurs, the general price level of goods and services rises, eroding the purchasing power of money. This has varied effects on different groups within society.

For instance, individuals on fixed incomes, such as retirees, may find their standard of living affected adversely as their income does not increase at the same rate as prices. Conversely, those who own assets that tend to appreciate during periods of inflation, like real estate or stocks, may see their wealth increase relative to those who do not.

Furthermore, inflation can benefit borrowers, as they can repay loans with money that is worth less than when they initially borrowed it. On the other hand, savers may find the real value of their savings diminishing. This inherently creates a redistribution effect, as the impact of inflation is not uniform across different socioeconomic groups.

In contrast, stagflation, which describes a situation of stagnant economic growth accompanied by high inflation, and deflation, where the general price levels decrease, do not inherently redistribute income and wealth in the same consistently identifiable way as inflation does. Their effects can differ significantly depending on various factors, but inflation uniquely highlights disparities in how different economic actors are