Question

Higher cost of borrowing means a larger part of the earnings of the borrowers have less income left for is used to repay the loan"

Answer 1

If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now he or she has more money in his or her paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay his or her debt early.