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Discuss inflation as it affects one of the following: labor, consumers, or government...

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kristenmarieb... | Student, Grade 10 | Valedictorian

Posted June 2, 2013 at 4:19 AM via web

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Discuss inflation as it affects one of the following: labor, consumers, or government spending.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted June 2, 2013 at 4:47 AM (Answer #1)

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Inflation tends to be hard on consumers.  This depends to some degree on how they do as part of the labor force, though.

Inflation, of course, is the increase in the overall price level.  This means that the average price of things that are sold in an economy goes up.  Each specific item will not necessarily increase in price, but the average price will go up.  For consumers, of course, this is a bad thing.  When the prices go up, they will be able to buy fewer goods and services.  This will reduce their standard of living.

However, it is possible that consumers will not be hit too hard. If they are lucky, their wages (because many consumers are also part of the labor force) will go up to compensate for inflation.  In that situation, they will at least be able to maintain their standard of living.

In short, then, inflation will hurt consumers by making the things they buy less affordable unless the consumers also get corresponding pay raises at their jobs.

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