Section B
Directions: There are 2 passages in this section. Each passage is followed by some questions or unfinished statements. For each of them there are four choices marked A, B, C and D. You should decide on the best choice.
Before discussing the effect of deflation and inflation on the distribution of income, it will be useful to define these terms. By inflation we mean a time of generally rising prices of goods and factors of production, such as wages and rents. By deflation we mean a time when most prices and costs are falling. Neither in inflation nor in deflation do prices all move in the same direction or in exactly the same proportion. As a result of changes in relative prices and in total spending, the two processes of inflation and deflation cause definite and characteristic changes in the distribution of income among economic classes.
Unforeseen inflation tends to favor debtors and profit receivers at the expense of creditors and fixed-income receivers. Suppose, for example, you lend ＄1,000 today and me paid back one year from now. If in the meantime prices have doubled, then your debtor will be paying back only one half as much real purchasing power as you gave him Or consider an American who was earning a fixed rate of 6% yearly on a mortgage prior to World War Ⅱ. After 1939 he found that, as a result of inflation caused by World War Ⅱ, he was not even holding his own as far as real purchasing power of the dollar was concerned. On the other band, one who invests in real estate, in common stocks, or in commodities makes a great profit dining times of unforeseen inflation, when the volume of business sales increases greatly, as do prices, between the time that businesspersons buy and sell their merchandise, fixed or overhead costs remain the same; other costs rise, but not so rapidly as prices. For all these reasons, profits increase--often faster than the cost of living.
In times of deflation, the situation is reversed Creditors and fixed-income receivers tend to gain at the expense of debtors and profit receivers. If prices fall between the time that a creditor lends money and is repaid, then he gets back more purchasing power than he lent. Between the time that a merchant buys and sells goods, he will have to take a loss. The school teacher who keeps his jobs and whose pay is not cut, however, finds that his real income has increased. Likewise, a hoarder who earns no interest on the money she keeps hidden finds the real value of her wealth increasing everyday as prices fall. If prices fall at the rate of 10% a year, she is being rewarded for her antisocial act of hoarding at a 10% rate of interest in real terms, while the businessperson who gives someone a job may find that he can't even get back his outlay, much less earn a profit.
Which of the following statements is true according to the passage？

A. Deflation means that prices all are falling.
B. Fixed-income receivers can benefit much from inflation.
C. Inflation occurs much more titan deflation.
D. Even in inflation, prices of some goods may be falling