Answer to Question #42805 in Macroeconomics for Johnny

Question

Evaluate as accurately as you can the manner in which each of the following individual would be affected by fairly rapid inflation.

(i) A department store assistant
(ii) A car assembly line worker
(iii) A heavily indebted farmer
(iv) A retired business person whose current income is from interest on government bonds.
(v) The owner of an independent corner shop.

Answer 1

(i) A department store assistant will be very affected by rapid inflation as his nominal income will be the same, but real income will decrease.
(ii) A car assembly line worker will be affected like a department store assistant.
(iii) A heavily indebted farmer will be better off, because the real value of his debt will decrease.
(iv) A retired business person whose current income is from interest on government bonds will earn much more less, because as the interest will be the same, the real earnings will decrease.
(v) The owner of an independent corner shop will not be seriously affected by inflation.