WAEC Economics 2015 Theory — Question 18

Model answer

(i) Pensioners and creditors gain, since the value of money increases as prices fall. (ii) It also encourages saving, because money's value as a store for deferred payment increases (people don't need to spend quickly to avoid losing value, so they continue saving). (iii) The balance of payments position will improve as a result of a decrease in imports and an increase in exports (as domestic goods become relatively cheaper). Savings will also increase as a result of the increase in the value of money.