The topic of inflation and its impact on debt repayment is a complex yet relevant subject that has appeared in IELTS Writing Task 2 questions in recent years. As global economic conditions continue to fluctuate, it’s likely that this theme will remain a popular choice for future IELTS exams. To help you prepare, let’s explore a sample question and provide model essays for different band scores.
Analyzing the Question
Some people believe that inflation can be beneficial for those who have borrowed money, as it reduces the real value of their debt. To what extent do you agree or disagree with this statement?
This question asks you to consider the relationship between inflation and debt repayment. It’s essential to understand the following key points:
- The main topic is the effect of inflation on debt.
- The statement suggests a positive impact of inflation on borrowers.
- You need to express your opinion and provide supporting arguments.
Sample Essay for Band 8-9
Here’s a high-quality essay that would likely score in the Band 8-9 range:
Inflation, the general increase in prices and fall in the purchasing value of money, is often viewed negatively. However, some argue that it can benefit borrowers by diminishing the real value of their debt. While I partially agree with this statement, I believe the overall impact of inflation on debt repayment is more nuanced and potentially harmful in the long run.
On one hand, inflation can indeed reduce the relative burden of debt for borrowers. As the value of money decreases over time, the fixed amount owed becomes less significant in real terms. For instance, a mortgage taken out today might seem more manageable in a decade if salaries have increased due to inflation while the loan amount remains constant. This scenario can provide relief to individuals and businesses struggling with substantial debt loads.
However, this perceived benefit comes with several caveats. Firstly, inflation often leads to higher interest rates, as lenders attempt to protect themselves against the eroding value of money. This can result in increased monthly payments for those with variable-rate loans, potentially offsetting any advantages gained from the reduced real value of the principal. Moreover, if inflation outpaces wage growth, which is not uncommon, borrowers may find themselves in a worse financial position, struggling to meet even the devalued debt payments.
Furthermore, high inflation can have broader economic consequences that indirectly affect borrowers. It can lead to economic instability, reduced consumer spending, and potential job losses. In such an environment, even if the real value of debt decreases, borrowers may face greater challenges in generating the income necessary to service their loans.
In conclusion, while inflation can theoretically benefit borrowers by reducing the real value of their debt, this advantage is often outweighed by the associated risks and economic instability. A more sustainable approach to managing debt involves maintaining low and stable inflation rates, coupled with responsible borrowing and lending practices. This balanced approach would provide a more predictable and manageable environment for both borrowers and lenders alike.
(Word count: 309)
Sample Essay for Band 6-7
Here’s an essay that would likely score in the Band 6-7 range:
Inflation is when prices go up and money becomes less valuable. Some people think this is good for people who have borrowed money because it makes their debt smaller in real terms. I partly agree with this idea, but I also think there are some problems with it.
On the positive side, inflation can make debt seem smaller over time. For example, if someone borrows $10,000 today, in 10 years that amount might not seem as big because everything else has gotten more expensive. This can help people who have a lot of debt feel less worried about paying it back.
However, there are some negative effects of inflation on debt too. First, when there is inflation, banks often raise interest rates. This means that even though the original amount borrowed might seem smaller, the monthly payments could go up. This could make it harder for people to pay back their loans.
Another problem is that inflation doesn’t always mean people earn more money. If prices go up but salaries don’t increase as much, people might actually have less money to pay their debts. This could make their situation worse, not better.
Also, high inflation can cause problems for the whole economy. It can make businesses unsure about the future, which might lead to less jobs. If people lose their jobs or earn less money, it will be very hard for them to pay any debts, even if the value of the debt has gone down.
In conclusion, while inflation can make debts seem smaller in some ways, it also brings many problems that can make it harder for people to pay back what they owe. I think it’s better to have a stable economy with low inflation, where people can plan their finances more easily.
(Word count: 287)
Key Points to Remember When Writing
-
Essay structure: Both essays follow a clear structure with an introduction, body paragraphs, and a conclusion. The Band 8-9 essay has more sophisticated paragraph transitions and a more nuanced argument.
-
Vocabulary: The Band 8-9 essay uses more advanced vocabulary and financial terms, while the Band 6-7 essay uses simpler language. For example:
- Band 8-9: “diminishing the real value”, “economic instability”, “servicing their loans”
- Band 6-7: “makes their debt smaller”, “prices go up”, “pay back their loans”
-
Grammar: The higher band essay demonstrates a wider range of complex sentence structures, while the lower band essay uses simpler constructions.
-
Cohesion and coherence: Both essays maintain a logical flow, but the Band 8-9 essay shows more sophisticated linking of ideas.
-
Task response: Both essays address the question, but the Band 8-9 essay provides a more in-depth analysis and a more nuanced conclusion.
Important Vocabulary to Remember
- Inflation (noun) /ɪnˈfleɪʃən/ – a general increase in prices and fall in the purchasing value of money
- Debt repayment (noun phrase) /det rɪˈpeɪmənt/ – the act of paying back money that was borrowed
- Purchasing power (noun phrase) /ˈpɜːrtʃəsɪŋ ˌpaʊər/ – the ability to buy goods and services
- Interest rates (noun phrase) /ˈɪntrəst reɪts/ – the proportion of a loan that is charged as interest to the borrower
- Economic stability (noun phrase) /ˌiːkəˈnɒmɪk stəˈbɪləti/ – a situation in which an economy does not experience extreme fluctuations
- Variable-rate loans (noun phrase) /ˈveəriəbl reɪt ləʊnz/ – loans where the interest rate can change over time
- Consumer spending (noun phrase) /kənˈsjuːmə ˈspendɪŋ/ – the amount of money spent by households on goods and services
- Wage growth (noun phrase) /weɪdʒ grəʊθ/ – an increase in the amount of money earned by employees
Conclusion
Understanding the effects of inflation on debt repayment is crucial for tackling IELTS Writing Task 2 questions on this topic. By analyzing the sample essays and noting the key differences between band scores, you can improve your own writing skills. Remember to practice writing your own essays on this and related topics, such as:
- The role of central banks in controlling inflation
- The impact of inflation on savings and investment
- Government policies to manage inflation and economic growth
We encourage you to write your own essay based on the question provided and share it in the comments section below. This practice will help you refine your skills and prepare effectively for the IELTS Writing Task 2.
For more insights on related topics, you might find our article on how to combat inflation through monetary policy helpful in expanding your understanding of economic concepts relevant to IELTS writing tasks.