Answer to Question #114721 in Microeconomics for Rosa

Question #114721
why an increase of the wages above the inflation rate should be turned
down as it is detrimental to the economy?
Expert's answer

Yes, it should be turn down because:

Inflation means fall in the value of money. When price rises or the value of money falls,

the effects of inflation on redistribution of income, wealth, production, and on the society as a whole leads to increase in demand and decrease in supply.

Increase in wage may gain the effect of inflation, if their wages adjust to inflation rate. BUT, at the long run, workers lose because by the time wages are raised, the cost of living index may have increased further.

For the Government, increase in wages favour the government because the tax-paying will increase. This can lead to a rise in unit labour costs and lower profits for businesses.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!


No comments. Be the first!

Leave a comment

Ask Your question

New on Blog