Official Answer Key & Detailed Solution
Ready to check the official UPSC Answer Key?
Click any option above to test yourself under exam conditions, or reveal the explanation directly.
Correct Answer: Option (A) — 1 only
Concept & Option Breakdown
Standard Reference Verified• Statement 1 is correct: Debtors repay their fixed nominal loans with money that has lower purchasing power than when it was borrowed, effectively reducing the real value of their debt. • Statement 2 is incorrect: Bond-holders (creditors) receive fixed interest coupon payments whose real purchasing power is eroded by inflation, leading to a loss in real returns.
In times of inflation, borrowers/debtors gain while lenders/creditors/bondholders lose because the real value of future repayments declines.
Practice Full-Length & Sectional Prelims Mocks on this Interface
50 simulated tests in the APT Prelims Test Series (₹1,493) or 1-on-1 Mentorship with Avinash Sir.