ECON 102 Chapter Notes - Chapter 2: Robert J. Shiller, Real Wages, Opioid Use Disorder
Document Summary
If you ask the average person why inflation is a social issue, he would probably respond that inflation makes him poorer" Each year my employer gives me a raise, but prices go up and that takes some of my raise away from me" The implicit implication in this argument is that if there were no inflation, he would get the same increase and be able to afford more goods: this inflation argument is a common error. As we know labor"s buying power the actual wage depends on labor"s marginal output, not how much money the government wants to print out. If the government slowed down inflation by slowing the rate of growth in income, the workers would not see their real wage rise faster. It"s as if we were switching from measuring distances in feet to measuring them in inches: numbers are getting bigger but nothing really changes.
