Home Forums Principles of Economics Question about Saif’s explanation of Inflation -> Unemployment Reply To: Question about Saif’s explanation of Inflation -> Unemployment

  • Diego Aguila

    Member
    May 17, 2024 at 17:59

    In Saif’s explanation we are assuming that the prices of sandwiches are staying the same but other prices are rising. In other words, inflation is affecting the cost of living of the sandwich workers because the goods that they spend their wages on are increasing but the sandwiches they make aren’t so they can’t have their wages risen because the sandwich prices have remained the same. This is why inflation redistributes wealth because the new money entering the economy is raising the prices of goods of where it is being spent and in Saif’s example, the new money never got to be spent on the sandwiches.