Final answer:
Creditors can avoid being hurt more than borrowers during periods of high inflation by adjusting interest rates, diversifying investments, and securing loans with collateral.
Step-by-step explanation:
During periods of high inflation, creditors can avoid being hurt more than borrowers through various strategies:
Adjusting interest rates: Creditors can include a clause in their lending contracts that allows them to adjust the interest rates periodically based on inflation rates.
This way, they can ensure that they are compensated for the decrease in purchasing power caused by inflation.
Diversifying investments: Creditors can diversify their loan portfolios by lending to borrowers in different sectors or regions.
This can help spread the risk and minimize the impact of inflation on their overall loan portfolio.
Collateral and security: Creditors can secure their loans with collateral or assets that tend to retain their value during inflation.
This way, even if the borrower is unable to repay the loan in full, the creditor can still recover some of the value through the sale of the collateral.